Agreement and Plan of Merger - Concord EFS Inc. and Star Systems Inc.
AGREEMENT AND PLAN OF MERGER
AMONG
CONCORD EFS, INC.,
ORION ACQUISITION CORP.
AND
STAR SYSTEMS, INC.
Dated as of October 6, 2000
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TABLE OF CONTENTS
Page
ARTICLE I THE MERGER 2
Section 1.1 The Merger. 2
Section 1.2 Effective Time. 2
Section 1.3 Effects of the Merger. 2
Section 1.4 Charter and Bylaws; Directors and Officers. 2
Section 1.5 Conversion of Securities. 3
Section 1.6 Delivery of Certificates and Payment of Cash. 4
Section 1.7 Dividends; Transfer Taxes; Withholding. 5
Section 1.8 No Fractional Securities. 6
Section 1.9 Return of Exchange Fund. 6
Section 1.10 Adjustment of Exchange Ratio. 7
Section 1.11 No Further Ownership Rights in Company Common Stock. 7
Section 1.12 Closing of Company Transfer Books. 7
Section 1.13 Lost Certificates. 7
Section 1.14 Further Assurances. 7
Section 1.15 Closing; Closing Deliveries. 8
ARTICLE II REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB 9
Section 2.1 Organization, Standing and Power. 10
Section 2.2 Capital Structure. 10
Section 2.3 Authority. 11
Section 2.4 Consents and Approvals; No Violation. 12
Section 2.5 SEC Documents and Other Reports. 13
Section 2.6 Actions and Proceedings. 13
Section 2.7 Required Vote of Parent Stockholders. 14
Section 2.8 Pooling of Interests; Reorganization. 14
Section 2.9 Tax Matters. 14
Section 2.10 Brokers. 15
Section 2.11 Operations of Sub. 15
Section 2.12 Permits and Compliance; Defaults. 15
Section 2.13 Certain Agreements. 15
Section 2.14 ERISA. 16
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY 17
Section 3.1 Organization, Standing and Power. 17
Section 3.2 Capital Structure. 17
Section 3.3 Authority. 19
Section 3.4 Consents and Approvals; No Violation. 19
Section 3.5 Financial Statements. 20
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Section 3.6 No Dividends; Absence of Certain Changes or Events. 21
Section 3.7 Governmental Permits. 23
Section 3.8 Tax Matters. 24
Section 3.9 Actions and Proceedings. 25
Section 3.10 Certain Agreements. 25
Section 3.11 ERISA. 25
Section 3.12 Worker Safety and Environmental Laws. 27
Section 3.13 Labor Matters. 27
Section 3.14 Intellectual Property; Software. 27
Section 3.15 Availability of Assets and Legality of Use. 30
Section 3.16 Real Property. 31
Section 3.17 Real Property Leases. 31
Section 3.18 Personal Property Leases. 31
Section 3.19 Title to Assets. 31
Section 3.20 Contracts. 32
Section 3.21 Status of Contracts. 33
Section 3.22 Insurance. 33
Section 3.23 Budgets. 33
Section 3.24 Takeover Statutes and Charter Provisions. 34
Section 3.25 Required Vote of Company Stockholders. 34
Section 3.26 Opinion of Financial Advisor. 34
Section 3.27 Pooling of Interests; Reorganization. 34
Section 3.28 Brokers. 34
Section 3.29 Hart-Scott-Rodino 34
Section 3.30 Stockholder Information. 34
Section 3.31 Investor Qualifications. 35
ARTICLE IV COVENANTS RELATING TO CONDUCT OF BUSINESS 36
Section 4.1 Conduct of Business Pending the Merger. 36
Section 4.2 No Solicitation. 38
Section 4.3 Third Party Standstill Agreements. 39
Section 4.4 Pooling of Interests; Reorganization. 40
ARTICLE V ADDITIONAL AGREEMENTS 40
Section 5.1 Stockholder Consent. 40
Section 5.2 Access to Information. 41
Section 5.3 Fees and Expenses. 41
Section 5.4 Company Stock Plan. 41
Section 5.5 Commercially Reasonable Efforts; Pooling of Interests. 42
Section 5.6 Public Announcements. 44
Section 5.7 Real Estate Transfer and Gains Tax. 44
Section 5.8 Transfer Tax Filings. 44
Section 5.9 Other Transfer Taxes. 44
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Section 5.10 State Takeover Laws. 44
Section 5.11 Indemnification; Directors and Officers Insurance. 45
Section 5.12 Notification of Certain Matters. 45
Section 5.13 Compliance with the Securities Act. 46
Section 5.14 Registration Rights Agreement. 46
Section 5.15 Employee Matters. 46
Section 5.16 Advisory Committee. 47
Section 5.17 Directorship 48
ARTICLE VI CONDITIONS PRECEDENT TO THE MERGER 48
Section 6.1 Conditions to Each Party's Obligation to Effect the Merger. 48
Section 6.2 Condition to Obligation of the Company to Effect the Merger. 49
Section 6.3 Conditions to Obligations of Parent and Sub to Effect the
Merger. 49
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER 51
Section 7.1 Termination. 51
Section 7.2 Effect of Termination. 55
Section 7.3 Amendment. 55
Section 7.4 Waiver. 55
ARTICLE VIII GENERAL PROVISIONS 55
Section 8.1 Non-Survival of Representations and Warranties. 55
Section 8.2 Notices. 56
Section 8.3 Interpretation. 57
Section 8.4 Counterparts. 57
Section 8.5 Entire Agreement; No Third-Party Beneficiaries. 57
Section 8.6 Governing Law. 58
Section 8.7 Assignment. 58
Section 8.8 Severability. 58
Section 8.9 Enforcement of this Agreement. 58
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EXHIBITS
Exhibit A
Form of Stockholder Agreement
Exhibit B
Form of Company Affiliate Letter
Exhibit C
Form of Parent Affiliate Letter
Exhibit D
Form of Registration Rights Agreement
Exhibit E
Form of Employment Agreement Amendment
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TABLE OF DEFINED TERMS
Defined Term Section
--------------------------------------------------------------------------------
Advisory Board Section 5.16(a)
Affiliate Section 3.15
Agreement First paragraph
Audited Financial Statements Section 3.5
Balance Sheet Section 3.5
Balance Sheet Date Section 3.5
Bank Act Section 2.4
Blue Sky Laws Section 2.4
Calculation Period Section 7.1(g)
Certificates Section 1.6(a)
Certificate of Merger Section 1.2
Class A Shares Recital
Class B Shares Recital
Closing Section 1.15(a)
Closing Date Section 1.15(a)
Code Recitals
Company First paragraph
Company Affiliate Letter Section 5.13(a)
Company Agreements Section 3.21
Company Ancillary Agreements Section 3.3
Company Business Personnel Section 3.13
Company Bylaws Section 1.15(d)
Company Charter Section 1.4(a)
Company Common Stock Recitals
Company Diluted Share Number Section 1.5(c)
Company Letter Section 3.2(c)
Company Multiemployer Plan Section 3.11(c)
Company Permits Section 3.7
Company Plan Section 3.11(c)
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Company Stockholders Section 1.6(a)
Company Stock Options Section 3.2(a)
Company Stock Plan Section 3.2(a)
Confidentiality Agreement Section 5.2
Constituent Corporations First paragraph
Copyrights Section 3.14(a)(iii)
D&O Insurance Section 5.11(a)
DGCL Section 1.1
Determination Date Section 7.1(g)
Dissenting Shares Section 1.5(d)
Domain Names Section 3.14(a)(iv)
Effective Time Section 1.2
Employment Agreements Section 6.3(j)
Employment Agreement Amendments Section 6.3(j)
Encumbrance Section 3.6(c)(vii)
Environmental Laws Section 3.12
ERISA Section 2.14(a)
ERISA Affiliate Section 2.14(c)
Exchange Act Section 2.5
Exchange Agent Section 1.6(a)
Exchange Fund Section 1.6(a)
Exchange Ratio Section 1.5(c)
Financial Statements Section 3.5
GAAP Section 2.5
Gains Taxes Section 5.7
Governmental Entity Section 2.4
HSR Act Section 2.4
Indemnified Party Section 5.11(a)
Index Company Price Section 7.1(g)
Index Company Ratios Section 7.1(g)
Index Group Section 7.1(g)
Intellectual Property Section 3.14(a)
IRS Section 3.8(a)
Joint Venture Section 3.2(d)
Knowledge of Parent Section 2.6
Knowledge of the Company Section 3.6(e)
Leased Real Property Section 3.17
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Material Adverse Change Section 2.1
Material Adverse Effect Section 2.1
Member Agreements Section 3.20(xiii)
Merger Recitals
Nasdaq Section 1.8
Network Section 5.16(a)
Owned Software Section 3.14(j)
Parent First paragraph
Parent Affiliate Letter Section 5.13(b)
Parent Ancillary Agreements Section 2.3
Parent Annual Report Section 2.2(c)
Parent Average Price Section 7.1(g)
Parent Bylaws Section 2.4
Parent Charter Section 1.15(b)
Parent Common Stock Recitals
Parent Letter Section 2.2(a)
Parent Multiemployer Plan Section 2.14(c)
Parent Permits Section 2.12
Parent Plan Section 2.14(c)
Parent SEC Documents Section 2.5
Parent Stock Options Section 2.2(a)
Parent Stock Plans Section 2.2(a)
Parent Transactions Section 2.2(a)
Patent Rights Section 3.14(a)(i)
PBGC Section 2.14(a)
Permitted Encumbrance Section 3.6(c)(vii)
Person Section 3.15
Real Property Leases Section 3.17
Registered Intellectual Property Section 3.14(f)
Registration Rights Agreement Section 5.14
Requirements of Laws Section 3.9
Rule 145 Affiliates Section 5.13(a)
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SEC Section 2.2(c)
Securities Act Section 2.5
Share Issuance Section 2.3
Software Section 3.14(b)
Starting Date Section 7.1(g)
State Takeover Approvals Section 2.4
Stockholder Agreements Recitals
Stockholder Consent Section 5.1
Stockholder Information Section 3.30
Sub First paragraph
Subsidiary Section 2.2(d)
Substitute Option Section 5.4(a)
Superior Proposal Section 4.2(a)
Surviving Corporation Section 1.1
Takeover Proposal Section 4.2(a)
Taxes Section 2.9
Tax Return Section 2.9
Trademarks Section 3.14(a)(ii)
Trade Secrets Section 3.14(a)(v)
Transfer Taxes Section 5.8
Transmittal Letter Section 1.6(a)
Unaudited Financial Statements Section 3.5
Worker Safety Laws Section 3.12
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of October 6, 2000 (this
"Agreement"), among Concord EFS, Inc ., a Delaware corporation ("Parent"), Orion
Acquisition Corp., a Delaware corporation and a direct wholly-owned subsidiary
of Parent ("Sub"), and Star Systems, Inc., a Delaware corporation (the
"Company") (Sub and the Company being hereinafter collectively referred to as
the "Constituent Corporations").
W I T N E S S E T H:
WHEREAS, the respective Boards of Directors of Parent, Sub and the Company
have approved and declared advisable the merger of Sub with and into the Company
with the Company surviving (the "Merger"), upon the terms and subject to the
conditions set forth herein, whereby each issued and outstanding Class A Share
of Common Stock, par value $0.01 per share ("Class A Shares"), of the Company
and each issued and outstanding Class B Share of Common Stock, par value $0.01
per share of the Company (the "Class B Shares" and collectively with the Class A
Shares, the "Company Common Stock"), not owned directly or indirectly by the
Company, will be converted into shares of Common Stock, par value $0.33 1/3 per
share, of Parent ("Parent Common Stock");
WHEREAS, the respective Boards of Directors of Parent and the Company have
determined that the Merger is in furtherance of and consistent with their
respective long-term business strategies and is in the best interest of their
respective stockholders;
WHEREAS, in order to induce Parent and Sub to enter into this Agreement,
concurrently herewith certain stockholders of the Company are entering into
agreements with Parent dated as of the date hereof (the "Stockholder
Agreements"), in the form of the attached Exhibit A, pursuant to which, among
other things, each such stockholder has agreed to vote in favor of this
Agreement and the Merger;
WHEREAS, it is intended that the Merger will qualify as a reorganization
within the meaning of section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code"); and
WHEREAS, it is intended that the Merger shall be recorded for accounting
purposes as a pooling of interests.
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NOW, THEREFORE, in consideration of the premises, representations,
warranties and agreements herein contained, the parties agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger.
Upon the terms and subject to the conditions set forth in this Agreement,
and in accordance with the Delaware General Corporation Law (the "DGCL"), Sub
shall be merged with and into the Company at the Effective Time (as hereinafter
defined). Following the Merger, the separate corporate existence of Sub shall
cease and the Company shall continue as the surviving corporation (the
"Surviving Corporation") and shall succeed to and assume all the rights and
obligations of Sub in accordance with the DGCL. Notwithstanding anything to the
contrary herein, at the election of Parent, any direct wholly-owned Subsidiary
(as hereinafter defined) of Parent may be substituted for Sub as a Constituent
Corporation in the Merger; provided that such substituted corporation is a
Delaware corporation which is formed solely for the purpose of engaging in the
transactions contemplated by this Agreement and has engaged in no other business
activities. In such event, the parties agree to execute an appropriate amendment
to this Agreement, in form and substance reasonably satisfactory to Parent and
the Company, in order to reflect such substitution.
Section 1.2 Effective Time. The Merger shall become effective when a
Certificate of Merger (the "Certificate of Merger"), executed in accordance with
the relevant provisions of the DGCL, is filed with the Secretary of State of the
State of Delaware; provided, however, that, upon mutual written consent of the
Constituent Corporations, the Certificate of Merger may provide for a later date
of effectiveness of the Merger not more than 30 days after the date the
Certificate of Merger is filed. When used in this Agreement, the term "Effective
Time" shall mean the date and time at which the Certificate of Merger is
accepted for recording or such later time established by the Certificate of
Merger. The filing of the Certificate of Merger shall be made on the date of the
Closing (as hereinafter defined).
Section 1.3 Effects of the Merger. The Merger shall have the effects set
forth in Sections 259 through 261 of the DGCL.
Section 1.4 Charter and Bylaws; Directors and Officers. (a) At the
Effective Time, the Certificate of Incorporation, as amended, of the Company
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(the "Company Charter"), as in effect immediately prior to the Effective Time,
shall be amended so that (i) Article FOURTH reads in its entirety as follows:
"The total number of shares of all classes of capital stock which the
Corporation shall have authority to issue is 1,000 shares of Common Stock, par
value $.01 per share" (ii) subsection (7) of Article SIXTH reads in its entirety
as follows: "Intentionally deleted" and (iii) Article SEVENTH reads in its
entirety as follows: "Intentionally deleted". As so amended, the Company Charter
shall be the Certificate of Incorporation of the Surviving Corporation until
thereafter changed or amended as provided therein or by applicable law. At the
Effective Time, the Bylaws of Sub, as in effect immediately prior to the
Effective Time, shall be the Bylaws of the Surviving Corporation until
thereafter changed or amended as provided therein or in the Certificate of
Incorporation of the Surviving Corporation. (b) The directors of Sub and the
employee officers of the Company at the Effective Time shall be the directors
and officers of the Surviving Corporation, until the earlier of their
resignation or removal or until their respective successors are duly elected and
qualified, as the case may be.
Section 1.5 Conversion of Securities. As of the Effective Time, by virtue
of the Merger and without any action on the part of Sub, the Company or the
holders of any securities of the Constituent Corporations: (a) Each issued and
outstanding share of common stock, par value $0.01 per share, of Sub shall be
converted into one validly issued, fully paid and nonassessable share of common
stock of the Surviving Corporation. (b) All shares of Company Common Stock that
are held in the treasury of the Company or by any wholly owned Subsidiary of the
Company shall be canceled and no capital stock of Parent or other consideration
shall be paid or delivered in exchange therefor. (c) Subject to the provisions
of Sections 1.8, 1.10 and 7.1(g) hereof, each share of Company Common Stock
issued and outstanding immediately prior to the Effective Time (other than
Dissenting Shares (as hereinafter defined) and shares to be canceled in
accordance with Section 1.5(b)) shall be converted into the right to receive
4.6452 (such number being the "Exchange Ratio") validly issued, fully paid and
nonassessable shares of Parent Common Stock (the Exchange Ratio being determined
by dividing (i) 24,750,000 by (ii) the aggregate number of shares of Company
Common Stock outstanding determined on a fully diluted basis assuming all
options are fully exercised (the "Company Diluted Share Number") as of the date
hereof). In the event the Company Diluted Share Number immediately prior to the
Effective Time shall be greater than 5,328,036, the Exchange Ratio shall be
proportionately reduced and all references to the Exchange Ratio in this
Agreement shall be deemed to be to the Exchange Ratio, as so reduced. All shares
of Company Stock outstanding immediately prior to the Effective Time, when so
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converted, shall no longer be outstanding and shall automatically be canceled
and retired and each holder of a certificate representing any such shares shall
cease to have any rights with respect thereto, except the right to receive (i)
subject to Section 1.6, certificates representing the shares of Parent Common
Stock into which such shares are converted, (ii) dividends and other
distributions in accordance with Section 1.7, and (iii) any cash, without
interest, in lieu of fractional shares to be issued or paid in consideration
therefor in accordance with Section 1.8. (d) Notwithstanding anything in this
Agreement to the contrary, shares of Company Common Stock issued and outstanding
immediately prior to the Effective Time which are held of record by stockholders
who shall not have voted such shares in favor of the Merger and who shall have
demanded properly in writing appraisal of such shares in accordance with Section
262 of the DGCL ("Dissenting Shares") shall not be converted into the right to
receive Parent Common Stock and cash as set forth in Section 1.5(c), but the
holders thereof instead shall be entitled to, and the Dissenting Shares shall
only represent the right to receive, payment of the fair value of such shares in
accordance with the provisions of Section 262 of the DGCL; provided, however,
that (i) if such a holder fails to demand properly in writing from the Surviving
Corporation the appraisal of his or its shares in accordance with Section 262(d)
of the DGCL or, after making such demand, subsequently delivers an effective
written withdrawal of such demand, or fails to establish his or its entitlement
to appraisal rights as provided in Section 262 of the DGCL, if so required, or
(ii) if a court shall determine that such holder is not entitled to receive
payment for his or its shares or such holder shall otherwise lose his or its
appraisal rights, then, in any such case, each share of Company Common Stock
held of record by such holder or holders shall automatically be converted into
and represent only the right to receive Parent Common Stock and cash as set
forth in Section 1.5(c), upon surrender of the certificate or certificates
representing such Dissenting Shares. Any cash paid in respect of Dissenting
Shares shall be paid by the Company solely with its own funds, and the Company
shall not be reimbursed therefor by Parent or any of its Subsidiaries either
directly or indirectly. (e) In calculating the consideration payable under this
Section 1.5, Parent shall be entitled to rely on the representations and
warranties contained in Section 3.2(a) and the certificate delivered pursuant to
Section 6.3(f). If such representations, warranties and certificate are not
correct, Parent shall have the right to adjust the Exchange Ratio accordingly
and, notwithstanding anything else to the contrary contained in this Agreement,
in no event shall the aggregate merger consideration payable by Parent, Sub or
the Surviving Corporation to the holders of equity interests in the Company
(including, without limitation, holders of options) in connection with the
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Merger or the transactions contemplated hereby exceed such consideration payable
assuming such representations, warranties and certificate are correct. Section
1.6 Delivery of Certificates and Payment of Cash. (a) At or after the Effective
Time, each holder of record of a certificate or certificates (collectively, the
"Certificates") representing shares of Company Common Stock issued and
outstanding immediately prior to the Effective Time (collectively, the "Company
Stockholders"), may surrender such Certificate or Certificates to Parent's
designee as the exchange agent (the "Exchange Agent"), together with a letter of
transmittal in the form prepared by Parent (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon actual delivery of the Certificates to the Exchange Agent and shall
contain instructions for use in effecting the surrender of the Certificates in
exchange for certificates representing shares of Parent Common Stock and cash in
lieu of fractional shares) (the "Transmittal Letter"). Promptly after the
Effective Time, Parent shall deposit with the Exchange Agent certificates
representing the shares of Parent Common Stock issuable pursuant to Section
1.5(c) for exchange with outstanding shares of Company Common Stock, and cash as
required to make payments in lieu of any fractional shares pursuant to Section
1.8 (such cash and shares of Parent Common Stock, together with any dividends or
distributions with respect hereto, being hereinafter referred to as the
"Exchange Fund"). The Exchange Agent shall deliver the Parent Common Stock
contemplated to be issued pursuant to Section 1.5(c) out of the Exchange Fund.
Upon surrender for cancellation to the Exchange Agent of all Certificates held
by any Company Stockholder, together with the Transmittal Letter, duly executed,
such Company Stockholder shall be entitled to receive in exchange therefor a
certificate representing that number of whole shares of Parent Common Stock into
which the shares represented by the Certificate or Certificates so surrendered
shall have been converted at the Effective Time pursuant to Section 1.5(c), cash
in lieu of any fractional share in accordance with Section 1.8 and certain
dividends and other distributions in accordance with Section 1.7, and any
Certificate so surrendered shall forthwith be canceled. (b) Each Transmittal
Letter shall contain representations and warranties by the Person (as
hereinafter defined) surrendering any Certificates similar to those contained in
Section 3.31. Each certificate delivered pursuant to Section 1.6 evidencing any
Parent Common Stock shall bear a legend substantially as follows: "THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. SUCH
SECURITIES HAVE BEEN ACQUIRED BY THE HOLDER HEREOF NOT WITH A VIEW TO, OR FOR
RESALE IN CONNECTION WITH, ANY DISTRIBUTION THEREOF WITHIN THE MEANING OF THE
SECURITIES ACT OF 1933, AS AMENDED. SUCH SECURITIES MAY NOT BE OFFERED, SOLD OR
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OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS (A) THE SECURITIES HAVE
BEEN REGISTERED UNDER SUCH ACT AND ANY AND ALL SUCH OTHER APPLICABLE LAWS, OR
(B) PARENT RECEIVES AN OPINION OF COUNSEL, IN FORM AND SUBSTANCE REASONABLY
SATISFACTORY TO PARENT, TO THE EFFECT THAT REGISTRATION OF SUCH SECURITIES IS
NOT REQUIRED."
Section 1.7 Dividends; Transfer Taxes; Withholding. No dividends or other
distributions that are declared on or after the Effective Time on Parent Common
Stock, or are payable to the Company Stockholders on or after the Effective
Time, will be paid to any Person entitled by reason of the Merger to receive a
certificate representing Parent Common Stock until such Person surrenders the
related Certificate or Certificates, as provided in Section 1.6, and no cash
payment in lieu of fractional shares will be paid to any such Person pursuant to
Section 1.8 until such Person shall so surrender the related Certificate or
Certificates. Subject to the effect of applicable law, there shall be paid to
each record holder of a new certificate representing such Parent Common Stock:
(i) at the time of such surrender or as promptly as practicable thereafter, the
amount of any dividends or other distributions theretofore paid with respect to
the shares of Parent Common Stock represented by such new certificate and having
a record date on or after the Effective Time and a payment date prior to such
surrender; (ii) at the appropriate payment date or as promptly as practicable
thereafter, the amount of any dividends or other distributions payable with
respect to such shares of Parent Common Stock and having a record date on or
after the Effective Time but prior to such surrender and a payment date on or
subsequent to such surrender; and (iii) at the time of such surrender or as
promptly as practicable thereafter, the amount of any cash payable with respect
to a fractional share of Parent Common Stock to which such holder is entitled
pursuant to Section 1.8. In no event shall the Person entitled to receive such
dividends or other distributions or cash in lieu of fractional shares be
entitled to receive interest on such dividends or other distributions or cash in
lieu of fractional shares. If any cash or certificate representing shares of
Parent Common Stock is to be paid to or issued in a name other than that in
which the Certificate surrendered in exchange therefor is registered, it shall
be a condition of such exchange that the Certificate so surrendered shall be
properly endorsed and otherwise in proper form for transfer and that the Person
requesting such exchange shall pay to Parent any transfer or other taxes
required by reason of the issuance of certificates for such shares of Parent
Common Stock in a name other than that of the registered holder of the
Certificate surrendered, or shall establish to the satisfaction of Parent that
such tax has been paid or is not applicable. Parent shall be entitled to deduct
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and withhold from the consideration otherwise payable pursuant to this Agreement
to any Person such amounts as Parent is required to deduct and withhold with
respect to the making of such payment under the Code or under any provision of
state, local or foreign tax law. To the extent that amounts are so withheld by
Parent, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the Person who otherwise would have received
the payment in respect of which such deduction and withholding was made by
Parent.
Section 1.8 No Fractional Securities. No certificates or scrip representing
fractional shares of Parent Common Stock shall be issued upon the surrender for
exchange of Certificates pursuant to this Article I, and no Parent dividend or
other distribution or stock split shall relate to any fractional share, and no
fractional share shall entitle the owner thereof to vote or to any other rights
of a securityholder of Parent. In lieu of any such fractional share, each holder
of Company Common Stock who would otherwise have been entitled to a fraction of
a share of Parent Common Stock upon surrender of Certificates for exchange
pursuant to this Article I will be paid an amount in cash (without interest),
rounded down to the nearest cent, determined by multiplying (i) the last
reported sale price per share of Parent Common Stock on the Nasdaq National
Market System ("Nasdaq") on the Closing Date (or, if the shares of Parent Common
Stock do not trade on Nasdaq on such date, the trading day immediately preceding
the Closing Date) by (ii) the fractional interest to which such holder would
otherwise be entitled. As promptly as practicable after the determination of the
amount of cash, if any, to be paid to holders of fractional share interests, the
Exchange Agent shall so notify Parent, and Parent shall deposit such amount with
the Exchange Agent and shall cause the Exchange Agent to forward payments to
such holders of fractional share interests subject to and in accordance with the
terms of Section 1.7 and this Section 1.8.
Section 1.9 Return of Exchange Fund. Any portion of the Exchange Fund
deposited with the Exchange Agent which remains undistributed to the Company
Stockholders for 60 days after the Effective Time shall be delivered to Parent,
upon demand of Parent, and any such Company Stockholders who have not
theretofore complied with this Article I shall thereafter look only to Parent
for payment of their claim for Parent Common Stock, any cash in lieu of
fractional shares of Parent Common Stock and any dividends or distributions with
respect to Parent Common Stock. Neither Parent nor the Surviving Corporation
shall be liable to any former holder of Company Common Stock for any
consideration payable in accordance with this Article I which is delivered to a
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public official pursuant to any applicable abandoned property, escheat or
similar law.
Section 1.10 Adjustment of Exchange Ratio. In the event of any
reclassification, stock split or stock dividend with respect to Parent Common
Stock or any change or conversion of Parent Common Stock into other securities
(or if a record date with respect to any of the foregoing should occur) prior to
the Effective Time, appropriate and proportionate adjustments, if any, shall be
made to the Exchange Ratio, and all references to the Exchange Ratio in this
Agreement shall be deemed to be to the Exchange Ratio, as so adjusted.
Section 1.11 No Further Ownership Rights in Company Common Stock. All
shares of Parent Common Stock issued upon the surrender for exchange of
Certificates in accordance with the terms hereof (including any cash paid
pursuant to Section 1.8) shall be deemed to have been issued in full
satisfaction of all rights pertaining to the shares of Company Common Stock
represented by such Certificates.
Section 1.12 Closing of Company Transfer Books. At the Effective Time, the
stock transfer books of the Company shall be closed and no transfer of shares of
Company Common Stock shall thereafter be made on the records of the Company. If,
after the Effective Time, Certificates are presented to the Surviving
Corporation or Parent, such Certificates shall be canceled and exchanged as
provided in this Article I.
Section 1.13 Lost Certificates. If any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the Person
claiming such Certificate to be lost, stolen or destroyed and, if required by
Parent or the Exchange Agent, the posting by such Person of a bond, in such
amount as Parent or the Exchange Agent may direct, as indemnity against any
claim that may be made against Parent, the Surviving Corporation or the Exchange
Agent with respect to such Certificate, the Exchange Agent will issue in
exchange for such lost, stolen or destroyed Certificate, the shares of Parent
Common Stock to which the holder thereof is entitled pursuant to Section 1.5,
any cash in lieu of fractional shares of Parent Common Stock to which the holder
thereof is entitled pursuant to Section 1.8 and any dividends or other
distributions to which the holder thereof is entitled pursuant to Section 1.7.
Section 1.14 Further Assurances. If at any time after the Effective Time
the Surviving Corporation shall consider or be advised that any deeds, bills of
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sale, assignments or assurances or any other acts or things are necessary,
desirable or proper (a) to vest, perfect or confirm, of record or otherwise, in
the Surviving Corporation its right, title or interest in, to or under any of
the rights, privileges, powers, franchises, properties or assets of either of
the Constituent Corporations, or (b) otherwise to carry out the purposes of this
Agreement, the Surviving Corporation and its proper officers and directors or
their designees shall be authorized to execute and deliver, in the name and on
behalf of either of the Constituent Corporations, all such deeds, bills of sale,
assignments and assurances and to do, in the name and on behalf of either
Constituent Corporation, all such other acts and things as may be necessary,
desirable or proper to vest, perfect or confirm the Surviving Corporation's
right, title or interest in, to or under any of the rights, privileges, powers,
franchises, properties or assets of such Constituent Corporation and otherwise
to carry out the purposes of this Agreement.
Section 1.15 Closing; Closing Deliveries. (a) The closing of the
transactions contemplated by this Agreement (the "Closing") and all actions
specified in this Agreement to occur at the Closing shall take place at the
offices of Sidley & Austin, Bank One Plaza, 10 South Dearborn Street, Chicago,
Illinois, at 10:00 a.m., local time, no later than the fifth business day
following the day on which the last of the conditions set forth in Article VI
shall have been fulfilled or waived (if permissible) or at such other time and
place as Parent and the Company shall agree (the date of the Closing is referred
to herein as the "Closing Date"). (b) Subject to fulfillment or waiver of the
conditions set forth in Article VI, at the Closing Parent shall deliver to the
Company all of the following: (i) a copy of the Restated Certificate of
Incorporation, as amended, of Parent (the "Parent Charter"), certified as of a
recent date by the Secretary of State of the State of Delaware; (ii) a
certificate of good standing of Parent, issued as of a recent date by the
Secretary of State of the State of Delaware; (iii) a certificate of the
Secretary or an Assistant Secretary of Parent, dated the Closing Date, in form
and substance reasonably satisfactory to the Company, as to (a) no amendments to
the Parent Charter since a specified date, (b) the Bylaws of Parent, (c) the
resolutions of the Board of Directors of Parent authorizing the execution and
performance of this Agreement and the transactions contemplated herein, and (d)
the incumbency and signatures of the officers of Parent executing this Agreement
and any other agreement or certificate executed by Parent in connection with the
Closing; (iv) the certificate contemplated by Section 6.2(a); and (v) all
consents, waivers or approvals obtained by Parent with respect to the
consummation of the transactions contemplated by this Agreement. (c) Subject to
<PAGE>
fulfillment or waiver of the conditions set forth in Article VI, at the Closing
Sub shall deliver to the Company all of the following: (i) a copy of the
Certificate of Incorporation of Sub certified as of a recent date by the
Secretary of the State of Delaware; (ii) a certificate of good standing of Sub,
issued as of a recent date by the Secretary of State of the State of Delaware;
and (iii) a certificate of the Secretary or an Assistant Secretary of Sub, dated
the Closing Date, in form and substance reasonably satisfactory to the Company,
as to (a) no amendments to the Certificate of Incorporation of Sub since a
specified date, (b) the Bylaws of Sub, (c) the resolutions of the Board of
Directors of Sub authorizing the execution and performance of this Agreement and
the transactions contemplated herein and the written consent of Parent in its
capacity as sole stockholder of Sub adopting this Agreement in accordance with
Section 251 of the DGCL, and (d) the incumbency and signatures of the officers
of Sub executing this Agreement and any other agreement or certificate executed
by Sub in connection with the Closing. (d) Subject to fulfillment or waiver of
the conditions set forth in Article VI, at the Closing the Company shall deliver
to Parent all of the following: (i) a copy of the Company Charter, certified as
of a recent date by the Secretary of State of the State of Delaware; (ii) a
certificate of good standing of the Company, issued as of a recent date by the
Secretary of State of the State of Delaware; (iii) a certificate of the
Secretary or an Assistant Secretary of the Company, dated the Closing Date, in
form and substance reasonably satisfactory to Parent, as to (i) no amendments to
the Company Charter since a specified date, (ii) the Bylaws of the Company, as
amended (the "Company Bylaws"), (iii) the resolutions of the Board of Directors
of the Company authorizing the execution and performance of this Agreement and
the transactions contemplated herein and the resolutions of the stockholders of
the Company approving and adopting this Agreement in accordance with Section 251
of the DGCL, and (iv) the incumbency and signatures of the officers of the
Company executing this Agreement and any other agreement or certificate executed
by the Company in connection with the Closing; (iv) all consents, waivers or
approvals obtained by the Company with respect to the consummation of the
transactions contemplated by this Agreement; (v) the certificates contemplated
by Sections 6.3(a), 6.3(c), 6.3(f), 6.3(g), 6.3(h) and 6.3(j); and (vi) the
written confirmations contemplated by Section 6.3(k).
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub represent and warrant, jointly and severally, to the Company
as follows:
<PAGE>
Section 2.1 Organization, Standing and Power. Each of Parent and Sub is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has the requisite corporate power and authority to
carry on its business as now being conducted. Each of Parent and Sub is duly
qualified to do business and is in good standing in each jurisdiction where the
character of its properties owned or held under lease or the nature of its
activities makes such qualification or good standing necessary, except where the
failure to be so qualified or in good standing would not, individually or in the
aggregate, have a Material Adverse Effect on Parent. For purposes of this
Agreement, "Material Adverse Change" or "Material Adverse Effect" means, when
used with respect to Parent or the Company, as the case may be, any event,
change or effect that individually or when taken together with all other such
events, changes or effects is or could reasonably be expected to be materially
adverse to the business, prospects, assets, liabilities, financial condition or
results of operations of Parent and its Subsidiaries, taken as a whole, or the
Company and its Subsidiaries, taken as a whole, as the case may be. None of the
following shall be deemed by itself or by themselves, to constitute a Material
Adverse Change or Material Adverse Effect: (i) conditions affecting the industry
in which the Company and its Subsidiaries or Parent and its Subsidiaries, as the
case may be, operates or the U.S. economy as a whole, or (ii) any effect arising
from the public announcement of this Agreement.
Section 2.2 Capital Structure. (a) As of the date hereof, the authorized
capital stock of Parent consists of 500,000,000 shares of Parent Common Stock.
At the close of business on September 29, 2000, (i) 215,364,106 shares of Parent
Common Stock were issued and outstanding, all of which were validly issued,
fully paid and nonassessable and free of preemptive rights, (ii) no shares of
Parent Common Stock were held in the treasury of Parent or by Subsidiaries of
Parent, and (iii) 24,220,513 shares of Parent Common Stock were reserved for
issuance pursuant to outstanding options, warrants, convertible securities and
rights ("Parent Stock Options"), to purchase or otherwise acquire shares of
Parent Common Stock under Parent's benefit plans or other arrangements or
pursuant to any plans or arrangements assumed by Parent in connection with any
acquisition, business combination or similar transaction (collectively, the
"Parent Stock Plans"). As of the date of this Agreement, except as set forth in
Section 2.2(a) of the letter dated as of the date hereof from Parent to the
Company, which letter relates to this Agreement and is designated therein as the
Parent Letter (the "Parent Letter"), except as set forth above, except for the
issuance of shares of Parent Common Stock pursuant to the Parent Stock Plans and
<PAGE>
except in connection with acquisitions, mergers or other business combinations
involving Parent or its Subsidiaries (the "Parent Transactions"), no shares of
capital stock or other voting securities of Parent were issued, reserved for
issuance or outstanding. All of the shares of Parent Common Stock issuable in
exchange for Company Common Stock at the Effective Time in accordance with this
Agreement will be, when so issued, duly authorized, validly issued, fully paid
and nonassessable and free of preemptive rights. As of the date of this
Agreement, except for (i) this Agreement and (ii) as set forth above, there are
no options, warrants, calls, rights, puts or agreements to which Parent or any
of its Subsidiaries is a party or by which any of them is bound obligating
Parent or any of its Subsidiaries to issue, deliver, sell or redeem, or cause to
be issued, delivered, sold or redeemed, any additional shares of capital stock
(or other voting securities or equity equivalents) of Parent or any of its
Subsidiaries or obligating Parent or any of its Subsidiaries to grant, extent or
enter into any such option, warrant, call, right, put or agreement. (b) As of
the date of this Agreement, each outstanding share of capital stock (or other
voting security or equity equivalent) of each Subsidiary of Parent is duly
authorized, validly issued, fully paid and nonassessable and each such share (or
other voting security or equity equivalent) is owned by Parent or another
Subsidiary of Parent, free and clear of all security interests, liens, claims,
pledges, options, rights of first refusal, agreements, limitations on voting
rights, charges and other encumbrances of any nature whatsoever, except where
any failure(s) be so duly authorized, valid issued, fully paid and nonassessable
or owned would not have, individually or in the aggregate, a Material Adverse
Effect on Parent. (c) Except as set forth in Section 2.2(c) of the Parent
Letter, Exhibit 21 to Parent's Annual Report on Form 10-K for the year ended
December 31, 1999, as filed with the Securities and Exchange Commission (the
"SEC") (the "Parent Annual Report"), contained a true, accurate and correct
statement in all material respects of all of the information required to be set
forth therein by the regulations of the SEC. (d) For purposes of this Agreement,
"Subsidiary" means any corporation, partnership, limited liability company,
joint venture, trust, association or other entity of which Parent or the
Company, as the case may be (either alone or through or together with any other
Subsidiary), owns, directly or indirectly, 50% or more of the stock or other
equity interests the holders of which are generally entitled to vote for the
election of the board of directors or other governing body of such corporation,
partnership, limited liability company, joint venture or other entity.
Section 2.3 Authority. On or prior to the date of this Agreement (i) the
Board of Directors of Sub approved this Agreement and declared this Agreement
<PAGE>
and the Merger advisable and fair to and in the best interest of Sub and its
sole stockholder, and (ii) the Board of Directors of Parent approved and adopted
this Agreement and approved the issuance of Parent Common Stock in connection
with the Merger (the "Share Issuance"), both in accordance with the DGCL. The
Board of Directors of Parent has approved the other agreements to be entered
into by it as contemplated hereby (such other agreements, the "Parent Ancillary
Agreements"). Parent has the requisite corporate power and authority to enter
into this Agreement and the Parent Ancillary Agreements, to consummate the
transactions contemplated hereby and thereby and to effect the Share Issuance.
Sub has all corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement by Parent and Sub and the Parent Ancillary Agreements by Parent,
and the consummation by Parent and Sub of the transactions contemplated hereby
and thereby, have been duly authorized by all necessary corporate action on the
part of Parent and Sub, subject to the filing of appropriate Merger documents as
required by the DGCL. This Agreement and the consummation of the transactions
contemplated hereby have been approved by the sole stockholder of Sub. This
Agreement has been duly executed and delivered by Parent and Sub and the Parent
Ancillary Agreements executed as of the date hereof have been duly executed and
delivered by Parent. Assuming the valid authorization, execution and delivery by
the other parties thereto and the validity and binding effect hereof and thereof
on the other parties thereto, this Agreement constitutes the valid and binding
obligation of Parent and Sub enforceable against each of them in accordance with
its terms, and each of the Parent Ancillary Agreements, upon execution and
delivery thereof by Parent, will constitute the valid and binding obligation of
Parent enforceable against it in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by the effect of general principles of equity
(regardless of whether enforcement is considered in a proceeding in equity or at
law).
Section 2.4 Consents and Approvals; No Violation. Assuming that all
consents, approvals, authorizations and other actions described in this Section
2.4 have been obtained and all filings and obligations described in this Section
2.4 have been made, except as set forth in Section 2.4 of the Parent Letter, the
execution and delivery of this Agreement by Parent and Sub, and the Parent
Ancillary Agreements by Parent, do not, and the consummation of the transactions
contemplated hereby and thereby and compliance with the provisions hereof and
thereof will not, result in any violation of, or default (with or without notice
<PAGE>
or lapse of time, or both) under, or give to others a right of termination,
cancellation or acceleration of any obligation or the loss of a material benefit
under, or result in the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of Parent or any of its
Subsidiaries under, any provision of (i) the Parent Charter or the Bylaws of
Parent (the "Parent Bylaws") or the Certificate of Incorporation or Bylaws of
Sub, (ii) the comparable charter or organization documents of any of Parent's
Subsidiaries, (iii) any loan or credit agreement, note, bond, mortgage,
indenture, lease or other agreement, instrument, permit, concession, franchise
or license applicable to Parent or any of its Subsidiaries or any of their
respective properties or assets, or (iv) any judgment, order, decree, statute,
law, ordinance, rule or regulation applicable to Parent or any of its
Subsidiaries or any of their respective properties or assets, other than, in the
case of clauses (ii), (iii) and (iv), any such violations, defaults, rights,
liens, security interests, charges or encumbrances that, individually or in the
aggregate, would not have a Material Adverse Effect on Parent, materially impair
the ability of Parent or Sub to perform their respective obligations hereunder
or, in the case of Parent, under the Parent Ancillary Agreements, or prevent the
consummation of any of the transactions contemplated hereby or thereby by Parent
or Sub. Except as set forth in Section 2.4 of the Parent Letter, no filing or
registration with, or authorization, consent or approval of, any domestic
(federal and state), foreign or supranational court, commission, governmental
body, regulatory agency, authority or tribunal (a "Governmental Entity") is
required by or with respect to Parent or any of its Subsidiaries in connection
with the execution and delivery of this Agreement by Parent or Sub or the Parent
Ancillary Agreements by Parent or is necessary for the consummation by Parent or
Sub of the Merger and the other transactions contemplated by this Agreement or
the Parent Ancillary Agreements, except for (i) in connection, or in compliance
with the provisions of the Bank Holding Company Act of 1956, as amended
(together with the rules and regulations promulgated thereunder, the "Bank
Act"), and the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended
(together with the rules and regulations promulgated thereunder, the "HSR Act"),
(ii) the filing of the Certificate of Merger with the Secretary of State of the
State of Delaware and appropriate documents with the relevant authorities of
other states in which the Company or any of its Subsidiaries is qualified to do
business, (iii) such filings, authorizations, orders and approvals as may be
required by state takeover laws (the "State Takeover Approvals"), (iv) such
filings as may be required in connection with the taxes described in Sections
5.7, 5.8 and 5.9, (v) applicable requirements, if any, of state securities or
"blue sky" laws ("Blue Sky Laws") and Nasdaq, (vi) applicable requirements, if
<PAGE>
any, under foreign laws and (vii) such other consents, orders, authorizations,
registrations, declarations and filings the failure of which to be obtained or
made would not, individually or in the aggregate, have a Material Adverse Effect
on Parent, materially impair the ability of Parent or Sub to perform its
obligations hereunder or, in the case of Parent, under the Parent Ancillary
Agreements, or prevent the consummation of any of the transactions contemplated
hereby or thereby by Parent or Sub.
Section 2.5 SEC Documents and Other Reports. Parent has filed all required
documents with the SEC between January 1, 2000 and the date hereof (the "Parent
SEC Documents"). As of their respective dates or, if amended, as of the date of
the last amendment, the Parent SEC Documents complied in all material respects
with the requirements of the Securities Act of 1933, as amended (together with
the rules and regulations promulgated thereunder, the "Securities Act") or the
Securities Exchange Act of 1934, as amended (together with the rules and
regulations promulgated thereunder, to "Exchange Act"), as the case may be, and,
at the respective times they were filed, none of the Parent SEC Documents
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading. The
consolidated financial statements (including, in each case, any notes thereto)
of Parent included in the Parent SEC Documents complied as to form in all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, were prepared in
accordance with generally accepted accounting principles ("GAAP") (except, in
the case of the unaudited statements, as permitted by Form 10-Q of the SEC)
applied on a consistent basis during the periods involved (except as may be
indicated therein or in the notes thereto) and fairly presented in all material
respects the consolidated financial position of Parent and its consolidated
Subsidiaries as at the respective dates thereof and the consolidated results of
their operations and their consolidated cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments and to any other adjustments described therein). Except as disclosed
in the Parent SEC Documents or as required by GAAP, Parent has not, since
December 31, 1999, made any material change in the accounting practices or
policies applied in the preparation of financial statements included in the
Parent SEC Documents.
Section 2.6 Actions and Proceedings. Except as set forth in the Parent SEC
Documents filed prior to the date of this Agreement and except as set forth in
<PAGE>
Section 2.6 of the Parent Letter, as of the date hereof, there are no actions,
suits, labor disputes or other litigation, legal or administrative proceedings
or governmental investigations pending or, to the Knowledge of Parent,
threatened against Parent or any of its Subsidiaries or, to the Knowledge of
Parent, any of its or their present or former officers, directors, employees,
consultants, agents or stockholders, as such, or any of its or their properties,
assets or business relating to the transactions contemplated by this Agreement
and the Parent Ancillary Agreements. Except as set forth in the Parent SEC
Documents filed prior to the date of this Agreement, and except as set forth in
Section 2.6 of the Parent Letter, as of the date hereof, there are no
outstanding orders, judgments, injunctions, awards or decrees of any
Governmental Entity against Parent or any of its Subsidiaries, or, to the
Knowledge of Parent (as hereinafter defined), against any of the present or
former directors or officers of Parent or any of its Subsidiaries, as such, or
any of its or their properties, assets or businesses that, individually or in
the aggregate, would have a Material Adverse Effect on Parent. For purposes of
this Agreement, "Knowledge of Parent" means the actual knowledge of the
individuals identified in Section 2.6 of the Parent Letter.
Section 2.7 Required Vote of Parent Stockholders. No vote of the
securityholders of Parent is required by law, the Parent Charter or the Parent
Bylaws or otherwise in order for Parent to consummate the Merger and the
transactions contemplated hereby.
Section 2.8 Pooling of Interests; Reorganization. To the Knowledge of
Parent, neither Parent nor any of its Subsidiaries has (i) taken any action or
failed to take any action which action or failure would jeopardize the treatment
of the Merger as a pooling of interests for accounting purposes or (ii) taken
any action or failed to take any action which action or failure would prevent
the Merger from qualifying as a reorganization within the meaning of Section
368(a) of the Code.
Section 2.9 Tax Matters. Except as otherwise set forth in Section 2.9 of
the Parent Letter, as of the date hereof, (i) Parent and each of its
Subsidiaries have filed all federal, and all material state, local and foreign,
Tax Returns (as hereinafter defined) required to have been filed or appropriate
extensions therefor have been properly obtained, and such Tax Returns are
correct and complete, except to the extent that any failure to so file or any
failure to be correct and complete would not, individually or in the aggregate,
have a Material Adverse Effect on Parent; (ii) all Taxes (as hereinafter
<PAGE>
defined) shown to be due on such Tax Returns have been timely paid or extensions
for payment have been properly obtained, except to the extent that any failure
to so pay or so obtain such an extension would not, individually or in the
aggregate, have a Material Adverse Effect on Parent; (iii) Parent and each of
its Subsidiaries have complied in all material respects with all rules and
regulations relating to the withholding of Taxes except to the extent that any
failure to comply with such rules and regulations would not, individually or in
the aggregate, have a Material Adverse Effect on Parent; and (iv) all
deficiencies asserted or assessments made as a result of any examination of such
Tax Returns by any taxing authority have been paid in full or are being timely
and properly contested other than any deficiencies or assessments that would
not, individually or in the aggregate, have a Material Adverse Effect on Parent.
For purposes of this Agreement: (i) "Taxes" means any federal, state, local,
foreign or provincial income, gross receipts, property, sales, use, license,
excise, franchise, employment, payroll, withholding, alternative or added
minimum, ad valorem, value-added, transfer or excise tax, or other tax, custom,
duty, governmental fee or other like assessment or charge of any kind
whatsoever, together with any interest or penalty imposed by any Governmental
Entity with respect thereto, and (ii) "Tax Return" means any return, report or
similar statement (including the attached schedules) required to be filed with
respect to any Tax, including, without limitation, any information return, claim
for refund, amended return or declaration of estimated Tax.
Section 2.10 Brokers. No broker, investment banker or other Person, other
than William Blair & Company, L.L.C., the fees and expenses of which will be
paid by Parent, is entitled to any broker's, finder's or other similar fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of Parent or Sub.
Section 2.11 Operations of Sub. Sub is a direct, wholly-owned subsidiary of
Parent, was formed solely for the purpose of engaging in the transactions
contemplated hereby, has engaged in no other business activities and has
conducted its operations only as contemplated hereby.
Section 2.12 Permits and Compliance; Defaults. Each of Parent and its
Subsidiaries is in possession of all licenses, franchises, permits, privileges,
immunities, approvals and other authorizations from Governmental Entities which
are necessary to entitle Parent or any of its Subsidiaries to own, lease or
possess, and operate and use its assets and to carry on its business
substantially as currently conducted (herein collectively called the "Parent
<PAGE>
Permits"), and each of the material Parent Permits are valid and in full force
and effect, except where the failure to be in possession of any of the Parent
Permits or the failure of any such Parent Permit to be in full force and effect
would not, individually or in the aggregate, have a Material Adverse Effect on
Parent. Parent and its Subsidiaries are in compliance in all material respects
with their respective obligations under the Parent Permits, with only such
exceptions as, individually or in the aggregate, would not have a Material
Adverse Effect on Parent.
Section 2.13 Certain Agreements. Except as set forth in Section 2.13 of the
Parent Letter, as of the date of this Agreement, neither Parent nor any of its
Subsidiaries is a party to any contract, agreement or arrangement which is a
"material contract" (as such term is defined in Item 601(b)(10) of Regulation
S-K under the Securities Act) to be performed after the date of this Agreement
that has not been filed or incorporated by reference in the Parent SEC
Documents. As of the date of this Agreement, each contract, agreement or
arrangement of Parent or its Subsidiaries which is a "material contract" (as
such term is defined in Item 601(b)(10) of Regulation S-K under the Securities
Act) is valid and binding on Parent or its respective Subsidiary, as applicable,
and in full force and effect and Parent and each Subsidiary has performed in all
material respects its obligations required to be performed by it to the date
hereof under each such contract, agreement or arrangement, except where the
failure of any such contract to be valid and binding or in full force and effect
or the failure of any such obligation to have been performed would not,
individually or in the aggregate, have a Material Adverse Effect on Parent.
Section 2.14 ERISA. (a) Except as would not, individually or in the
aggregate, have a Material Adverse Effect on Parent, each Parent Plan (as
hereinafter defined) complies in all material respects with Title IV of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), the Code
and all other applicable statutes and governmental rules and regulations, and
(ii) to the Knowledge of Parent, no "reportable event" (within the meaning of
Section 4043 of ERISA) for which the 30-day notice requirement to the Pension
Benefit Guaranty Corporation ("PBGC") has occurred prior to the date hereof with
respect to any Parent Plan. Except as would not, individually or in the
aggregate, have a Material Adverse Effect on Parent, neither Parent nor any of
its ERISA Affiliates (as hereinafter defined) has, within the five years
preceding the date hereof, withdrawn from any Parent Plan or Parent
Multiemployer Plan (as hereinafter defined) or instituted, or is currently
considering taking, any action to do so. Except as would not, individually or in
<PAGE>
the aggregate, have a Material Adverse Effect on Parent, no Parent Plan, nor any
trust created thereunder, has incurred any "accumulated funding deficiency" (as
defined in Section 301 of ERISA), whether or not waived. (b) Except as listed in
Section 2.14 of the Parent Letter, with respect to the Parent Plans, no event
has occurred and, to the Knowledge of Parent, there exists no condition or set
of circumstances in connection with which Parent or any of its ERISA Affiliates
would be subject to any material liability under the terms of such Parent Plans,
ERISA, the Code or any other applicable law, other than liabilities for benefits
payable in the normal course or premiums to the PBGC and other than any
liability that would not, individually or in the aggregate, have a Material
Adverse Effect on Parent. (c) As used herein, (i) "Parent Plan" means a "pension
plan" (as defined in Section 3(2) of ERISA (other than a Parent Multiemployer
Plan)), a "welfare plan" (as defined in Section 3(1) of ERISA), or any bonus,
profit sharing, deferred compensation, incentive compensation, stock ownership,
stock purchase, stock option, phantom stock, holiday pay, vacation, severance,
death benefit, sick leave, fringe benefit, insurance or other plan, or
arrangement, in each case established or maintained by Parent or any of its
ERISA Affiliates or as to which Parent or any of its ERISA Affiliates has
contributed or otherwise has any material liability, (ii) "Parent Multiemployer
Plan" means a "multiemployer plan" (as defined in Section 4001(a)(3) of ERISA)
to which Parent or any of its ERISA Affiliates is or has been obligated to
contribute within the five years preceding the date hereof, or otherwise has
material liability, and (iii) "ERISA Affiliate" means any trade or business
(whether or not incorporated) which is under common control or would be
considered a single employer with such Person in either case, pursuant to
Section 414(b), (c), (m) or (o) of the Code and the regulations promulgated
under those sections or pursuant to Section 4001(b) of ERISA and the regulations
promulgated thereunder.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Sub as follows:
Section 3.1 Organization, Standing and Power. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has the requisite corporate power and authority to carry
on its business as now being conducted. Each Subsidiary of the Company is duly
organized, validly existing and in good standing under the laws of the
jurisdiction in which it is organized and has the requisite corporate (in the
<PAGE>
case of a Subsidiary that is a corporation) or other power and authority to
carry on its business as now being conducted. The Company and each of its
Subsidiaries are duly qualified to do business, and are in good standing, in
each jurisdiction where the character of their properties owned or held under
lease or the nature of their activities makes such qualification or good
standing necessary, except where any such failure to be so qualified or licensed
and in good standing would not, individually or in the aggregate, have a
Material Adverse Effect on the Company.
Section 3.2 Capital Structure. (a) The authorized capital stock of the
Company consists of 8,000,000 shares of Company Common Stock, 6,000,000 of which
are designated as Class A Shares and 2,000,000 of which are designated as Class
B Nonvoting Shares. At the close of business on October 4, 2000, (i) 5,160,333
shares of Company Common Stock were issued and outstanding, all of which were
validly issued, fully paid and nonassessable and none of which has been issued
in violation of, or is subject to any preemptive or subscription rights, (ii) no
shares of Company Common Stock were held in the treasury of the Company or by
Subsidiaries of the Company, (iii) 258,000 shares of Company Common Stock were
reserved for issuance pursuant to the Star Systems, Inc. 2000 Equity Incentive
Plan (the "Company Stock Plan"), and (iv) 167,703 options (the "Company Stock
Options") to purchase shares of Company Common Stock pursuant to the Company
Stock Plan were outstanding. The Company Stock Plan is the only benefit plan of
the Company or its Subsidiaries under which any securities of the Company or any
of its Subsidiaries are issuable. Since October 4, 2000, except as set forth
above, no shares of capital stock or other voting securities of the Company were
issued, reserved for issuance or outstanding. Except as set forth in Section
3.2(a)(i) of the Company Letter (as hereinafter defined), there will be no
acceleration in the vesting of the Company Stock Options as a result of the
execution of this Agreement or consummation of the transactions contemplated
hereby. Except as set forth in Section 3.2(a)(ii) of the Company Letter and
except for the Company Stock Options there are no agreements, arrangements,
options, warrants, calls, rights, puts or commitments of any character relating
to the issuance, sale, purchase or redemption of any shares of capital stock or
other equity interests or equity equivalents of the Company or any of its
Subsidiaries, whether on conversion of other securities or otherwise, or
obligating the Company or any of its Subsidiaries to grant, extend or enter into
any such agreement, arrangement, option, warrant, call, right, put or
commitment. Except as set forth in Section 3.2(a)(iii) of the Company Letter,
the Company is not a party to, and does not otherwise have any Knowledge of the
current existence of, any stockholder agreement, voting trust agreement or any
<PAGE>
other similar contract, agreement, arrangement, commitment, plan or
understanding restricting or otherwise relating to the voting, dividend,
ownership or transfer rights of any shares of capital stock of the Company. True
and complete copies of the Company Charter, Company Bylaws, and the agreements
and other instruments referred to in Section 3.2(a) of the Company Letter have
been delivered to Parent. (b) Each outstanding share of capital stock (or other
equity interest or equity equivalent, as the case may be) of each Subsidiary of
the Company is duly authorized, validly issued, fully paid and nonassessable,
and each such share (or other equity interest or equity equivalent, as the case
may be) is owned by the Company or another Subsidiary of the Company, free and
clear of all security interests, liens, claims, pledges, options, rights of
first refusal, agreements, limitations on voting rights, charges and other
encumbrances of any nature whatsoever. The Company does not have any outstanding
bonds, debentures, notes or other obligations the holders of which have the
right to vote (or convertible into or exercisable for securities having the
right to vote) with the stockholders of the Company on any matter. (c) Section
3.2(c)(i) of the letter dated the date hereof and delivered on the date hereof
by the Company to Parent, which letter relates to this Agreement and is
designated the Company Letter (the "Company Letter") sets forth the name and
address of each holder of record of shares of capital stock of the Company
outstanding on the date hereof, together, in each case, with the number of
shares of Company Common Stock held by such holder. Section 3.2(c)(ii) of the
Company Letter sets forth each Company Stock Option issued by the Company,
together, in each case, with the number of shares issuable upon exercise
thereof, the grant date, the exercise price, the expiration date, the vesting
schedule and any early vesting provisions and the name and address of the record
owner thereof. Other than Ronald V. Congemi who holds the Company Stock Options
set forth in Section 3.2(c)(ii) of the Company Letter, none of the directors of
the Company holds, is eligible to hold or will hold, between the date hereof and
the Effective Time, any shares of Company Common Stock or any Company Stock
Options. True and complete copies of (i) the Company Stock Plan, and (ii) each
instrument governing any Company Stock Option has been delivered by the Company
to Parent. (d) Section 3.2(d) of the Company Letter sets forth a list of all
Subsidiaries and Joint Ventures of the Company and the jurisdiction in which
such Subsidiary or Joint Venture is organized. Section 3.2(d) of the Company
Letter also sets forth the nature and extent of the ownership and voting
interests held by the Company in each such Joint Venture. The Company has no
obligation to make any capital contributions, or otherwise provide assets or
cash, to any Joint Venture. Except as set forth in Section 3.2(d) of the Company
Letter, the Company does not, directly or indirectly, (i) own, of record or
<PAGE>
beneficially, any outstanding voting securities or other equity interests in any
corporation, partnership, joint venture or other entity or (ii) control any
corporation, partnership, joint venture or other entity. For purposes of this
Agreement, "Joint Venture" means any corporation, limited liability company,
partnership, joint venture, trust, association or other entity which is not a
Subsidiary of the Company, as the case may be, and in which (a) the Company,
directly or indirectly, owns or controls any shares of any class of the
outstanding voting securities or other equity interests, or (b) the Company or
one of its Subsidiaries is a general partner. (e) All issued and outstanding
shares of Company Common Stock have been issued in compliance with all
appropriate securities laws and are subject to all appropriate restrictions on
transfer in connection with such laws.
Section 3.3 Authority. On or prior to the date of this Agreement, the Board
of Directors of the Company approved this Agreement, declared this Agreement and
the Merger advisable and fair to and in the best interest of the Company and its
stockholders, resolved to recommend the approval and adoption of this Agreement
by the Company's stockholders, directed that this Agreement be submitted to the
Company's stockholders for approval and adoption, all in accordance with the
DGCL, approved the Stockholder Agreements and approved the other agreements to
be entered into by it as contemplated hereby (such other agreements, the
"Company Ancillary Agreements"). The Company has the requisite corporate power
and authority to enter into this Agreement and the Company Ancillary Agreements,
to consummate the transactions contemplated by the Company Ancillary Agreements
and, subject to approval by the stockholders of the Company of this Agreement,
to consummate the transactions contemplated hereby and thereby. The execution
and delivery of this Agreement and the Company Ancillary Agreements by the
Company and the consummation by the Company of the transactions contemplated
hereby and thereby have been duly authorized by all necessary corporate action
on the part of the Company, subject, in the case of this Agreement, to (x)
approval and adoption of this Agreement by the stockholders of the Company and
(y) the filing of appropriate Merger documents as required by the DGCL. This
Agreement has been duly executed and delivered by the Company. The Company
Ancillary Agreements executed as of the date hereof have each been duly executed
and delivered by the Company and no other corporate action on the part of the
Company is necessary in connection therewith. Assuming the valid authorization,
execution and delivery by the other parties thereto and the validity and binding
effect hereof and thereof on the other parties thereto, this Agreement
constitutes the valid and binding obligation of the Company enforceable against
it in accordance with its terms and each of the Company Ancillary Agreements
<PAGE>
upon execution and delivery thereof by the Company will constitute the valid and
binding obligation of the Company enforceable against it in accordance with its
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the enforcement
of creditors' rights generally and by the effect of general principles of equity
(regardless of whether enforcement is considered in a proceeding in equity or at
law).
Section 3.4 Consents and Approvals; No Violation. Assuming that all
consents, approvals, authorizations and other actions described in this Section
3.4 have been obtained and all filings and obligations described in this Section
3.4 have been made, except as set forth in Section 3.4 of the Company Letter,
the execution and delivery of this Agreement and the Company Ancillary
Agreements by the Company do not, and the consummation of the transactions
contemplated hereby and thereby and compliance with the provisions hereof and
thereof will not, result in any violation of, or default (with or without notice
or lapse of time, or both) under, or give to others a right of termination,
cancellation or acceleration of any obligation or the loss of a material benefit
under, or result in the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of the Company or any of its
Subsidiaries under, any provision of (i) the Company Charter or the Company
Bylaws, (ii) the comparable charter or organizational documents of any of the
Company's Subsidiaries, (iii) any loan or credit agreement, note, bond,
mortgage, indenture, guaranty, lease or other agreement, instrument, permit,
concession, franchise or license applicable to the Company or any of its
Subsidiaries or any of their respective properties or assets, or (iv) any
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to the Company or any of its Subsidiaries or any of their respective properties
or assets except, in the case of clauses (iii) or (iv), any such violations,
defaults, rights, liens, security interests, charges or encumbrances that,
individually or in the aggregate, would not have a Material Adverse Effect on
the Company, materially impair the ability of the Company to perform its
obligations hereunder or under the Company Ancillary Agreements or prevent the
consummation of the transactions contemplated hereby or thereby by the Company.
No filing or registration with, or authorization, consent or approval of, any
Governmental Entity is required by or with respect to the Company or any of its
Subsidiaries in connection with the execution and delivery of this Agreement or
the Company Ancillary Agreements by the Company or is necessary for the
consummation by the Company of the Merger and the other transactions
contemplated by this Agreement or the Company Ancillary Agreements, except for
<PAGE>
(i) in connection, or in compliance with, the provisions of the Bank Act and the
HSR Act, (ii) the filing of the Certificate of Merger with the Secretary of
State of the State of Delaware and appropriate documents with the relevant
authorities of other states in which the Company or any of its Subsidiaries is
qualified to do business, (iii) State Takeover Approvals, (iv) such filings as
may be required in connection with the taxes described in Sections 5.7, 5.8 and
5.9, (v) applicable requirements, if any, under foreign laws, and (vi) such
other consents, orders, authorizations, registrations, declarations and filings
the failure of which to be obtained or made would not, individually or in the
aggregate, have a Material Adverse Effect on the Company, materially impair the
ability of the Company to perform its obligations hereunder or under the Company
Ancillary Agreements, or prevent the consummation of any of the transactions
contemplated hereby or thereby by the Company.
Section 3.5 Financial Statements. Section 3.5 of the Company Letter
contains (i) the balance sheet (the "Balance Sheet") of the Company and its
subsidiaries as of December 31, 1999 (the "Balance Sheet Date") and the related
statements of income, stockholders' equity and cash flows for the year then
ended, together with the appropriate notes to such financial statements,
accompanied by the report thereon of Deloitte & Touche, LLP, independent public
accountants (the "Audited Financial Statements"), and (ii) the unaudited balance
sheet of the Company and its Subsidiaries as of July 31, 2000 and the related
unaudited statements of income, stockholders' equity and cash flows for the
seven months then ended (the "Unaudited Financial Statements" and together with
the Audited Financial Statements, the "Financial Statements"). Except as
disclosed in the notes thereto, the Financial Statements have been prepared in
conformity with GAAP consistently applied and fairly present in all material
respects the financial position of the Company and its Subsidiaries at the dates
of such balance sheets and the results of its operations and cash flows for the
respective periods indicated (except that the Unaudited Financial Statements are
subject to normal year-end audit adjustments and do not contain footnotes).
Section 3.6 No Dividends; Absence of Certain Changes or Events. (a) Except
as set forth in Section 3.6(a) of the Company Letter, since December 31, 1999,
the Company has not declared or made, or agreed to declare or make, any payment
of dividends or distributions to its stockholders (and no record date with
respect to any of the foregoing has occurred) or purchased or redeemed, or
agreed to purchase or redeem, any of its capital stock or other equity interest.
(b) Except as set forth in Section 3.6(b) of the Company Letter, since the
Balance Sheet Date there has been: (i) no Material Adverse Change with respect
<PAGE>
to the Company; and (ii) no material damage, destruction, loss or claim, whether
or not covered by insurance, or condemnation or other taking adversely affecting
any material assets or business of the Company or any of its Subsidiaries. (c)
Except as set forth in Section 3.6(c) of the Company Letter, since the Balance
Sheet Date, the Company and its Subsidiaries have conducted their respective
businesses in all material respects only in the ordinary course and in
conformity with past practice. Without limiting the generality of the foregoing,
since the Balance Sheet Date, except as set forth in Section 3.6(c) of the
Company Letter, neither the Company nor any of its Subsidiaries has: (i) issued,
delivered or agreed (conditionally or unconditionally) to issue or deliver, or
granted any option, warrant or other right to purchase, any of its capital stock
or other equity interest or any security convertible into its capital stock or
other equity interest; (ii) issued, delivered or agreed (conditionally or
unconditionally) to issue or deliver any of its bonds, notes or other debt
securities or borrowed or agreed to borrow any funds, other than in the ordinary
course of business consistent with past practice; (iii) paid any obligation or
liability (absolute or contingent) other than current liabilities reflected on
the Balance Sheet and current liabilities incurred since the Balance Sheet Date
in the ordinary course of business consistent with past practice or liabilities
and obligations not exceeding $50,000 in the aggregate; (iv) except in the
ordinary course of business consistent with past practice, made or permitted any
material amendment or termination of any Company Agreement (as hereinafter
defined); (v) undertaken or committed to undertake capital expenditures
exceeding $50,000 for any single project or related series of projects or
$200,000 in the aggregate; (vi) made charitable donations in excess of $10,000
in the aggregate; (vii) sold, leased (as lessor), transferred or otherwise
disposed of (including any transfers from the Company or any of its Subsidiaries
to any of the stockholders of the Company or any of their respective Affiliates
(as hereinafter defined)), or mortgaged or pledged, or imposed or suffered to be
imposed any lien, claim, charge, security interest, mortgage, pledge, easement,
conditional sale or other title retention agreement, defect in title, covenant
or other restriction of any kind (an "Encumbrance"), on any of the assets
reflected on the Balance Sheet or any assets acquired by the Company or any of
its Subsidiaries after the Balance Sheet Date, except for inventory and
immaterial amounts of personal property sold or otherwise disposed of for fair
value in the ordinary course of its business consistent with past practice and
except for (A) liens for taxes and other governmental charges and assessments
which are not yet due and payable, (B) liens of landlords and liens of carriers,
warehousemen, mechanics and materialmen and other like liens arising in the
ordinary course of business for sums not yet due and payable and (C) other liens
<PAGE>
or imperfections on property which are not material in amount, do not interfere
with, and are not violated by the consummation of the transactions contemplated
by, this Agreement, and do not materially detract from the value or
marketability of, or materially impair the existing use of, the property
affected by such lien or imperfection (each, a "Permitted Encumbrance"); (viii)
canceled any debts owed to or claims held by the Company or any of its
Subsidiaries (including the settlement of any claims or litigation) other than
in the ordinary course of its business consistent with past practice or debts or
claims not exceeding $50,000 in the aggregate; (ix) created, incurred or
assumed, or agreed to create, incur or assume, any indebtedness for borrowed
money or entered into, as lessee, any capitalized lease obligations (as defined
in Statement of Financial Accounting Standards No. 13); (x) accelerated or
delayed collection of notes or accounts receivable in advance of or beyond their
regular due dates or the dates when the same would have been collected in the
ordinary course of its business consistent with past practice; (xi) delayed or
accelerated payment of any account payable or other liability beyond or in
advance of its due date or the date when such liability would have been paid in
the ordinary course of its business consistent with past practice; (xii)
instituted any increase in any compensation payable to any employee, director or
consultant of the Company or any of its Subsidiaries or in any profit-sharing,
bonus, incentive, deferred compensation, insurance, pension, retirement,
medical, hospital, disability, welfare or other benefits made available to
employees of the Company or any of its Subsidiaries except, in case of employees
other than directors or officers, salary increases in connection with annual or
periodic compensation reviews in the ordinary course of business consistent with
the Company's past practice; (xiii) settled or compromised any material federal,
state, local or foreign income tax liability; (xiv) prepared or filed any Tax
Return inconsistent with past practice or, on any such Tax Return, took any
position, made any election, or adopted any method that is inconsistent with
positions taken, elections made or methods used in preparing or filing similar
Tax Returns in prior periods; (xv) made any change in the accounting principles
and practices used by the Company from those applied in the preparation of the
Financial Statements; or (xvi) entered into or become committed to enter into
any other material transaction except in the ordinary course of business
consistent with past practice. (d) Except as set forth in Section 3.6(d) of the
Company Letter, neither the Company nor any of its Subsidiaries is subject to
any liability (including, without limitation, unasserted claims), whether
absolute, contingent, accrued or otherwise, which is not shown or which is in
excess of amounts shown or reserved for in the Balance Sheet, other than
liabilities of the same nature as those set forth in the Balance Sheet and the
<PAGE>
notes thereto and reasonably incurred in the ordinary course of its business
consistent with past practice after the Balance Sheet Date or which,
individually or in the aggregate, would not have a Material Adverse Effect on
the Company. (e) For purposes of this Agreement, "Knowledge of the Company"
means the actual knowledge of the individuals identified in Section 3.6(e) of
the Company Letter.
Section 3.7 Governmental Permits. Each of the Company and its Subsidiaries
owns, holds or possesses all licenses, franchises, permits, privileges,
immunities, approvals and other authorizations from Governmental Entities which
are necessary to entitle the Company or any of its Subsidiaries to own, lease or
possess, and operate and use its assets and to carry on and conduct its business
substantially as currently conducted (herein collectively called the "Company
Permits"), except where the failure to be in possession of any of the Company
Permits would not, individually or in the aggregate, have a Material Adverse
Effect on the Company. Complete and correct copies of all of the material
Company Permits have been made available to Parent. Each of the Company and its
Subsidiaries has substantially fulfilled and performed its obligations under
each of the Company Permits as of the date hereof and no suspension or
cancellation of any of the Company Permits is pending or, to the Knowledge of
the Company, threatened and each of the material Company Permits is valid,
subsisting and in full force and effect, except where the failure of any such
Company Permit to be in full force and effect would not, individually or in the
aggregate, have a Material Adverse Effect on the Company and will continue in
full force and effect after the Effective Time, in each case without (x) the
occurrence of any breach, default or forfeiture of rights thereunder, or (y) the
consent, approval, or act of, or the making of any filing with, any Governmental
Entity.
Section 3.8 Tax Matters. (a) Except as otherwise set forth in Section
3.8(a) of the Company Letter, (i) the Company and each of its Subsidiaries have
filed all federal, and all material state, local and foreign, Tax Returns
required to have been filed or appropriate extensions therefor have been
properly obtained, and such Tax Returns are correct and complete, except to the
extent that any failure to so file or any failure to be correct and complete
would not, individually or in the aggregate, have a Material Adverse Effect on
the Company; (ii) all Taxes shown to be due on such Tax Returns have been timely
paid or extensions for payment have been properly obtained, except to the extent
that any failure to so pay or so obtain such an extension would not,
individually or in the aggregate, have a Material Adverse Effect on the Company;
<PAGE>
(iii) the Company and each of its Subsidiaries have complied in all respects
with all rules and regulations relating to the withholding of Taxes except to
the extent that any failure to comply with such rules and regulations would not,
individually or in the aggregate, have a Material Adverse Effect on the Company;
(iv) all Tax Returns referred to in clause (i) have been examined by the
Internal Revenue Service ("IRS") or the period for assessment of the Taxes in
respect of which such Tax Returns were required to be filed has expired; (v) no
material issues that have been raised in writing by the relevant taxing
authority in connection with the examination of the Tax Returns referred to in
clause (i) are currently pending; (vi) all deficiencies asserted or assessments
made as a result of any examination of such Tax Returns by any taxing authority
have been paid in full or are being timely and properly contested; (vii) no
withholding is required under Section 1445 of the Code in connection with the
Merger; (viii) neither the Company nor any of its Subsidiaries is a party to any
tax allocation or sharing agreement and neither the Company nor any of its
Subsidiaries has been a member of an affiliated group filing a consolidated
federal income tax return (other than a group the common parent of which was the
Company) or has any material liability for Taxes of any Person (other than the
Company and its Subsidiaries) under Treasury Regulation Section 1.1502-6 (or any
similar provision of state, local or foreign law) as a transferee or successor
or by contract or otherwise; (ix) there are no liens for Taxes upon the assets
of the Company or any of its Subsidiaries except liens relating to current Taxes
not yet due; and (x) none of the Company or any of its Subsidiaries has waived
or been requested to waive any statute of limitations in respect of Taxes, which
waiver or request is currently in effect. (b) Except as otherwise set forth in
Section 3.8(b) of the Company Letter, as a result of the transactions
contemplated by this Agreement, none of the Company, any Subsidiary of the
Company, or Parent has made, or will be obligated to make, a payment to an
individual that would be an "excess parachute payment" to a "disqualified
individual" as those terms are defined in Section 280G of the Code, without
regard to whether such payment is reasonable compensation for personal services
performed or to be performed in the future. (c) None of the Company, any
predecessor of the Company or any Subsidiary of the Company is (and none thereof
has ever been), a member of (i) any "affiliated group" (as defined in Section
1504(a) of the Code without regard to the limitations contained in Section
1504(b) of the Code) or (ii) any other group of corporations or entities which
files or has filed Tax Returns on a combined, consolidated or unitary basis.
Section 3.9 Actions and Proceedings. Except as set forth in Section 3.9 of
the Company Letter, there are no outstanding orders, judgments, injunctions,
<PAGE>
awards or decrees of any Governmental Entity or actions, suits, labor disputes
or other litigation or claims or legal, administrative or arbitration
proceedings or investigations pending or, to the Knowledge of the Company,
threatened against or involving the Company or any of its Subsidiaries, or
against or involving any of the present or former directors, officers, employees
or, to the Knowledge of the Company, consultants, agents or stockholders of the
Company or any of its Subsidiaries, as such, or any of its or their properties,
assets or business or any Company Plan (as hereinafter defined). The Company and
each of its Subsidiaries has complied in all material respects with all
Requirements of Laws which are applicable to the Company's assets or business.
There are no actions, suits, labor disputes or other litigation, legal or
administrative proceedings or governmental investigations pending or, to the
Knowledge of the Company, threatened against or affecting the Company or any of
its Subsidiaries or any of its or their present or former officers, directors,
employees, or, to the Knowledge of the Company, consultants, agents or
stockholders, as such, or any of its or their properties, assets or business
relating to the transactions contemplated by this Agreement and the Company
Ancillary Agreements. For purposes of this Agreement, "Requirements of Laws"
means any foreign, federal, state and local laws, statutes, regulations, rules,
codes or ordinances enacted, adopted, issued or promulgated by any Governmental
Entity (including, without limitation, those pertaining to electrical, building,
zoning, environmental and occupational safety and health requirements) or common
law.
Section 3.10 Certain Agreements. Except as set forth in Section 3.10 of the
Company Letter, neither the Company nor any of its Subsidiaries is a party to
any oral or written agreement or plan, including any employment agreement,
severance agreement, stock option plan, stock appreciation rights plan,
restricted stock plan or stock purchase plan, any of the benefits of which will
be increased, or the vesting of the benefits of which will be accelerated, by
the occurrence of any of the transactions contemplated by this Agreement or the
value of any of the benefits of which will be calculated on the basis of any of
the transactions contemplated by this Agreement. Except as set forth in Section
3.10 of the Company Letter, no holder of any option or warrant to purchase
shares of Company Common Stock, or shares of Company Common Stock granted in
connection with the performance of services for the Company or its Subsidiaries,
is or will be entitled to receive cash from the Company or any Subsidiary in
lieu of or in exchange for such option, warrant or shares.
Section 3.11 ERISA. (a) Each Company Plan (as hereinafter defined) is
<PAGE>
listed in Section 3.11(a) of the Company Letter, true and complete copies of
which have heretofore been delivered to Parent. Except as set forth in Section
3.11(a) of the Company Letter, (i) each Company Plan complies in all material
respects with Title IV of ERISA, the Code and all other applicable statutes and
governmental rules and regulations, and (ii) no "reportable event" (within the
meaning of Section 4043 of ERISA) has occurred with respect to any Company Plan
for which the 30-day notice requirement to the PBGC has not been waived. Neither
the Company nor any of its ERISA Affiliates has within the five years preceding
the date hereof withdrawn from any Company Plan that is a defined benefit plan
qualified under Section 401(a) of the Code or any Company Multiemployer Plan (as
hereinafter defined) or instituted, or is currently considering taking, any
action to do so. No action has been taken, or is currently being considered, to
terminate any Company Plan subject to Title IV of ERISA. No Company Plan, nor
any trust created thereunder, has incurred any "accumulated funding deficiency"
(as defined in Section 302 of ERISA), whether or not waived. (b) Except as
listed in Section 3.11(b) of the Company Letter, with respect to the Company
Plans, no event has occurred and, to the Knowledge of the Company, there exists
no condition or set of circumstances in connection with which the Company or its
ERISA Affiliates or Company Plan fiduciary could be subject to any material
liability under the terms of such Company Plans, ERISA, the Code or any other
applicable law, other than liabilities for benefits payable in the normal course
or premiums to the PBGC that are not yet due. All Company Plans that are
intended to be qualified under Section 401(a) of the Code have been determined
by the IRS to be so qualified or, if no such determination has been made, all
such Company Plans qualify in form with Section 401(a) of the Code, and the
Company is not aware of any reason why any such Company Plan is not so qualified
in operation. Neither the Company nor any of its ERISA Affiliates has been
notified by any Company Multiemployer Plan that such Company Multiemployer Plan
is currently in reorganization or insolvency under and within the meaning of
Section 4241 or 4245 of ERISA or that such Company Multiemployer Plan intends to
terminate or has been terminated under Section 4041A of ERISA. Except as
disclosed in Section 3.11(b) of the Company Letter, neither the Company nor any
of its ERISA Affiliates has any liability or obligation under any welfare plan
to provide benefits after termination of employment to any employee or dependent
other than as required by Section 4980B of the Code. (c) As used herein, (i)
"Company Plan" means a "pension plan" (as defined in Section 3(2) of ERISA
(other than a Company Multiemployer Plan)), a "welfare plan" (as defined in
Section 3(1) of ERISA), or any bonus, profit sharing, deferred compensation,
incentive compensation, stock ownership, stock purchase, stock option, phantom
stock, holiday pay, vacation, severance, death benefit, sick leave, fringe
<PAGE>
benefit, insurance or other plan, arrangement or understanding, in each case
established or maintained by the Company or any of its ERISA Affiliates or as to
which the Company or any of its ERISA Affiliates has contributed or otherwise
may have any liability, and (ii) "Company Multiemployer Plan" means a
"multiemployer plan" (as defined in Section 4001(a)(3) of ERISA) to which the
Company or any of its ERISA Affiliates is or has been obligated to contribute
within the five years preceding the date hereof or otherwise may have any
liability. (d) Section 3.11(d) of the Company Letter contains a list, and the
Company has heretofore provided to Parent a true and complete copy, of all (i)
severance, employment and consulting agreements with employees and consultants
of the Company and each of its ERISA Affiliates and (ii) severance programs and
policies of the Company and each of its ERISA Affiliates with or relating to its
employees.
Section 3.12 Worker Safety and Environmental Laws. The properties, assets
and past and present operations of the Company and its Subsidiaries have been
and are in all material respects in compliance with all applicable federal,
state, local and foreign laws, rules and regulations, orders, decrees,
judgments, permits and licenses relating to public and worker health and safety
(collectively, "Worker Safety Laws") and the protection and clean-up of the
environment and activities or conditions related thereto, including, without
limitation, those relating to the generation, handling, disposal, transportation
or release of hazardous materials (collectively, "Environmental Laws"), except
as would not, individually or in the aggregate, have a Material Adverse Effect
on the Company.
Section 3.13 Labor Matters. The Company has complied in all material
respects with all applicable laws, rules and regulations which relate to prices,
wages, hours, discrimination in employment and collective bargaining and to the
operation of its business and is not liable for any arrears of wages or any
withholding taxes or penalties for failure to comply with any of the foregoing,
except as would not, individually or in the aggregate, have a Material Adverse
Effect on the Company. Neither the Company nor any of its Subsidiaries is a
party to any collective bargaining agreement or labor contract. Neither the
Company nor any of its Subsidiaries has engaged in any unfair labor practice
with respect to any Persons employed by or otherwise performing services
primarily for the Company or any of its Subsidiaries (the "Company Business
Personnel"), and there is no unfair labor practice complaint or grievance
against the Company or any of its Subsidiaries by the National Labor Relations
Board or any comparable state agency pending or threatened in writing with
<PAGE>
respect to the Company Business Personnel. There is no labor strike, dispute,
slowdown or stoppage pending or, to the Knowledge of the Company, threatened
against or affecting the Company or any of its Subsidiaries which may interfere
with the respective business activities of the Company or any of its
Subsidiaries.
Section 3.14 Intellectual Property; Software. (a) For purposes of this
Agreement, the term "Intellectual Property" means the intellectual property
owned by, licensed to, or used by the Company or any Subsidiary of the Company
that relate to either the Company's or such Subsidiary's business, including
without limitation: (i) all United States and foreign patents, patent
applications, continuations, continuations-in-part, divisions, reissues, patent
disclosures, inventions (whether or not patentable) or improvements thereto
("Patent Rights"); (ii) all United States, state and foreign trademarks, service
marks, logos, trade dress and trade names (including all assumed or fictitious
names under which the Company or any Subsidiary of the Company is conducting its
business or has within the previous five years conducted its business), and any
other source-identifying designations or devices, including any combinations and
variations thereof, and associated goodwill, whether registered or unregistered,
and pending applications to register the foregoing ("Trademarks"); (iii) all
United States and foreign copyrights, whether registered or unregistered, and
pending applications to register the same ("Copyrights"); (iv) all Internet
domain names and registrations thereof ("Domain Names"); and (v) all
confidential ideas, trade secrets, computer software, including source code,
know-how, works-in-progress, concepts, methods, processes, inventions, invention
disclosures, formulae, reports, data, customer lists, mailing lists, business
plans, or other proprietary information ("Trade Secrets"). Section 3.14(a) of
the Company Letter sets forth all Patent Rights, Trademarks, Copyrights and
Domain Names owned by, licensed to, or used by the Company or any Subsidiary of
the Company that are material to the conduct of the Company's or such
Subsidiary's business as presently conducted. (b) For purposes of this
Agreement, the term "Software" means computer software programs and software
systems, including, without limitation, all databases, compilations, tool sets,
compilers, higher level or proprietary languages, related documentation and
materials, whether in source code, object code or human readable form, owned by,
licensed to, or used by the Company or any Subsidiary of the Company that are
material to the conduct of the Company's or such Subsidiary's business as
presently conducted. Section 3.14(b) of the Company Letter sets forth such
Software. (c) Section 3.14(c) of the Company Letter contains a list and
description of all agreements, commitments, contracts, understandings, licenses,
<PAGE>
sublicenses, assignments and indemnities which relate or pertain to any
Intellectual Property or Software and are material to the conduct of the Company
or any Subsidiary's business as currently conducted, to which the Company or any
Subsidiary is a party, showing in each case the parties thereto. (d) Except as
disclosed in Section 3.14(d) of the Company Letter, and except with respect to
software licensed to the Company that is subject to "shrink-wrap" license
agreements, either the Company or a Subsidiary of the Company has, through
ownership or licensing, all perpetual, unrestricted and royalty-free rights to
use the Intellectual Property as are material to the conduct of the business of
the Company and its Subsidiaries, taken as a whole. (e) Except as disclosed in
Section 3.14(e) of the Company Letter, neither the Company nor any Subsidiary of
the Company is in breach of or is aware of any allegation (communicated orally
or in writing) that the Company or any Subsidiary of the Company is in breach of
any material provision of any material agreement, commitment, contract,
understanding, license, sublicense, assignment or indemnity which relates to any
of the Intellectual Property or Software and the Company has not taken any
action which would impair or otherwise materially adversely affect its rights in
any of the Intellectual Property or Software. The transactions contemplated by
this Agreement and the Company Ancillary Agreements shall have no material
adverse effect on the validity and enforceability of any of the Intellectual
Property, Software or materials identified in Sections 3.14(a) and (b) of the
Company Letter, and, except as disclosed in Section 3.14(e) of the Company
Letter, the right, title and interest thereto of the Company or any Subsidiary
of the Company immediately after the Effective Time shall be identical to that
of the Company or such Subsidiary immediately prior to the Effective Time. (f)
Section 3.14(a) of the Company Letter includes a complete list of all issued
patents, pending patent applications, trademark registrations, pending trademark
registration applications, registered copyrights and pending copyright
registration applications owned by the Company or any Subsidiary (collectively,
the "Registered Intellectual Property"). Except as disclosed in Section 3.14(a)
of the Company Letter: (i) the Registered Intellectual Property has not been
sold, assigned or transferred to a third party, or abandoned or permitted to
lapse, and is not the subject of any pending opposition proceedings, office
actions, pending cancellation proceedings, pending interference proceedings,
pending lawsuit naming the Company or any Subsidiary as a party, or other
pending challenges or proceedings of which the Company or any Subsidiary has
knowledge; (ii) all registrations for Intellectual Property identified as being
owned by the Company are valid and in force, and all applications to register
any unregistered Intellectual Property are pending and in good standing, all
without challenge of any kind; (iii) the Intellectual Property owned by the
<PAGE>
Company is valid and enforceable; and (iv) each of the Company and its
Subsidiaries has the sole and exclusive right to bring actions for infringement
or unauthorized use of the Intellectual Property and Software owned by the
Company and such Subsidiaries, and to the Knowledge of the Company, there is no
basis for any such action. (g) Except as disclosed in Section 3.14(g) of the
Company Letter, each of the employees, agents, consultants, contractors or
others who have contributed to or participated in the discovery, creation or
development of any Intellectual Property on behalf of the Company or its
Subsidiaries: (i) has executed an assignment or an agreement to assign to the
Company of all right, title and interest in such Intellectual Property; (ii) is
a party to a valid "work-for-hire" agreement under which the Company or any
Subsidiary is deemed to be the original owner/author of all copyrightable
subject matter included in such Intellectual Property; or (iii) is otherwise
deemed by operation of law to have vested in the Company or any Subsidiary all
right, title and interest in such Intellectual Property by virtue of his
employment relationship with the Company or any such Subsidiary. (h) Except as
disclosed in Section 3.14(h) of the Company Letter, to the Knowledge of the
Company, no infringement of any copyright, trademark, service mark, trade name,
patent, patent right, or trade secret or other property right of any third
Person has occurred or results in any way, no claim of any such infringement has
been made or asserted against the Company or any Subsidiary of the Company, and
neither the Company nor any Subsidiary has had notice of, nor to the Knowledge
of the Company, does any basis for such a claim exist, in connection with the
operations, products (including software, equipment, machinery or other
devices), processes, methods or activities of the business of the Company or any
Subsidiary of the Company as presently conducted. (i) Except as disclosed in
Section 3.14(i) of the Company Letter, neither the Company nor any Subsidiary of
the Company, nor their respective employees or agents, have taken any of the
following actions such that a Material Adverse Effect on its rights in the
Intellectual Property or Software would result: disclosing or providing access
to source code for the Software except to employees of the Company or its
Subsidiaries bound by confidentiality obligations to the Company or its
Subsidiaries, or to third party consultants bound by confidentiality agreements;
disclosing any Trade Secrets without an appropriate non-disclosure agreement;
providing access to the Software without restrictions on use (including against
copying, sale, transfer, decompilation, disassembly or reverse-engineering); or
embedding, incorporating or modifying third-party software or other material
without adequate permission. (j) Except as disclosed in Section 3.14(j) of the
Company Letter: (i) the Software is not subject to any transfer, assignment,
site, equipment, or other operational limitations; (ii) the Company has
<PAGE>
maintained and protected the Software it owns (the "Owned Software") (including,
without limitation, all source code and system specifications) with appropriate
proprietary notices (including, without limitation, the notice of copyright in
accordance with the requirements of 17 U.S.C. Sec. 401), confidentiality and
non-disclosure agreements and such other measures as are necessary to protect
the proprietary, trade secret or confidential information contained therein;
(iii) the Owned Software has been registered or is eligible for protection and
registration under applicable copyright law and has not been forfeited to the
public domain; (iv) the Company has copies of all releases or separate versions
of the Owned Software so that the same may be subject to registration in the
United States Copyright Office; (v) the Company has complete and exclusive
right, title and interest in and to the Owned Software; (vi) to the Knowledge of
the Company, the Owned Software does not infringe any copyright, trademark,
service mark, trade name, patent, patent right, trade secret or other property
right of any other Person; (vii) any Owned Software includes the source code,
system documentation, statements of principles of operation and schematics, as
well as any pertinent commentary, explanation, program (including compilers),
workbenches, tools, and higher level or proprietary language used for the
development, maintenance, implementation and use thereof, so that a trained
computer programmer could develop, maintain, support, compile and use all
releases or separate versions of the same that are currently subject to
maintenance obligations by the Company; (viii) there are no agreements or
arrangements in effect with respect to the marketing, distribution, licensing or
promotion of the Owned Software by any other Person; (ix) the Owned Software
complies with all applicable Requirements of Laws relating to the export or
reexport of the same; and (x) to the Knowledge of the Company, the Owned
Software licensed to third parties in the ordinary course of the Company's
business may be exported or reexported to all countries without the necessity of
any license, other than to those countries specified as prohibited destinations
pursuant to applicable regulations of the U.S. Department of Commerce and/or the
United States State Department.
Section 3.15 Availability of Assets and Legality of Use. Except as set
forth in Section 3.15 of the Company Letter, the assets owned or leased by the
Company and its Subsidiaries constitute all the assets used in its business
(including, but not limited to, all books, records, computers and computer
programs and data processing systems) and are in good condition (subject to
normal wear and tear and immaterial impairments of value and damage) and
serviceable condition and are generally suitable for the uses for which
intended. Except as set forth in Section 3.15 of the Company Letter, there are
<PAGE>
no material services provided by any of the stockholders of the Company or any
of their Affiliates to the Company or any Subsidiary of the Company utilizing
either (i) assets not owned by the Company or its Subsidiaries as of the
Effective Time or (ii) Persons not employed by the Company or its Subsidiaries.
For purposes of this Agreement, "Affiliate" means, with respect to any Person,
any other Person which directly or indirectly controls, is controlled by or is
under common control with such Person. For purposes of this Agreement, "Person"
means any individual, corporation, partnership, joint venture, association,
joint-stock company, trust or unincorporated organization.
Section 3.16 Real Property. Neither the Company nor any of its Subsidiaries
owns any real property or holds any option to acquire any real property.
Section 3.17 Real Property Leases. Section 3.17 of the Company Letter sets
forth a list of each lease or similar agreement (the "Real Property Leases")
under which the Company or any Subsidiary of the Company is lessee of, or holds
or operates, any real property owned by any third Person (the "Leased Real
Property") as of the date hereof. Except as set forth in Section 3.17 of the
Company Letter each of the Company and its Subsidiaries has the right to quiet
enjoyment of all the real property described in such Schedule of which it is the
lessee for the full term of each such lease or similar agreement (and any
related renewal option) relating thereto, and the leasehold or other interest of
the Company or any Subsidiary in such real property is not subject or
subordinate to any Encumbrance except for Permitted Encumbrances and except for
such Encumbrances as would not, individually or in the aggregate, have a
Material Adverse Effect on the Company. Complete and correct copies of the Real
Property Leases have been made available by the Company to Parent.
Section 3.18 Personal Property Leases. Section 3.18 of the Company Letter
sets forth a list of each lease or other agreement or right, whether written or
oral, under which the Company or any Subsidiary of the Company is lessee of, or
holds or operates, any machinery, equipment, vehicle or other tangible personal
property owned by a third Person, except for any such lease, agreement or right
that is terminable by the Company or any Subsidiary of the Company without
penalty or payment on notice of 30 days or less, or which involves the payment
by the Company or any Subsidiary of the Company of rentals of less than $100,000
per year.
Section 3.19 Title to Assets. Each of the Company and its Subsidiaries has
good title to all of its assets reflected on the Balance Sheet as being owned by
<PAGE>
it and all of the assets thereafter acquired by it (except to the extent that
such assets have been disposed of after the Balance Sheet Date in the ordinary
course of business consistent with past practice), free and clear of all
Encumbrances, except for Permitted Encumbrances and except as set forth in
Section 3.19 of the Company Letter.
Section 3.20 Contracts. Except as set forth in Section 3.20 of the Company
Letter, and except for those contracts expressly permitted by Section 4.1 which
are entered into after the date of this Agreement, neither the Company nor any
Subsidiary of the Company is a party to or bound by: (i) any contract for the
purchase, sale or lease of real property other than the Real Property Leases;
(ii) any contract for the purchase of raw materials, other than in the ordinary
course of business; (iii) any contract for the sale of goods or services, other
than in the ordinary course of business; (iv) any contracts relating to the
marketing, distribution or manufacturing of products, services, processes or
technology individually involving more than $50,000; (v) any contract for the
purchase, licensing or development of software to be used by the Company or any
Subsidiary of the Company individually involving more than $50,000, other than
software licensed to the Company that is subject to "shrink-wrap" license
agreements; (vi) any guarantee of the obligations or liabilities of customers,
suppliers, officers, directors, employees, Affiliates of the Company or its
Subsidiaries, or any other Persons other than guarantees that are immaterial in
amount; (vii) any agreement which provides for, or relates to, the incurrence by
the Company or any Subsidiary of the Company of debt for borrowed money or the
extension of credit by the Company or any Subsidiary of the Company to any other
Person other than routine extensions of trade credit in the ordinary course of
business; (viii) any agreement or understanding with a third Person that
restricts the Company or any Subsidiary from carrying on its business anywhere
in the world; (ix) any contract which provides for, or relates to, any
non-competition arrangement with any Person, including any current or former
officer or employee of the Company or any Subsidiary; (x) any contract or group
of related contracts for capital expenditures in excess of $250,000 for any
single project or related series of projects; (xi) any partnership, joint
venture or other similar arrangement or agreement involving a sharing of profits
or losses; (xii) any contract which involves future payments or receipts by the
Company or any Subsidiary of the Company of more than $250,000, other than
contracts the subject matter of which is described in clauses (i) through (xi),
inclusive, above; (xiii) any contract with any stockholder relating to
processing or network participation services (the "Member Agreements"); or (xiv)
any contract for any purpose (whether or not made in the ordinary course of the
<PAGE>
business or otherwise not required to be listed or described in Section 3.20 of
the Company Letter) which is material to the Company, any Subsidiary of the
Company or their respective businesses.
Section 3.21 Status of Contracts. Except as set forth in Section 3.21 of
the Company Letter, each of the leases, contracts and other agreements listed in
Sections 3.11, 3.14, 3.17, 3.18 and 3.20 of the Company Letter (collectively,
the "Company Agreements") constitutes a valid and binding obligation of the
Company and, to the Knowledge of the Company, the other parties thereto, and is
in full force and effect and (except as set forth in Section 3.4 of the Company
Letter and except for those Company Agreements which by their terms will expire
prior to the Effective Time or are otherwise terminated prior to the Effective
Time in accordance with the provisions hereof) will continue in full force and
effect after the Effective Time, in each case without breaching the terms
thereof or resulting in the forfeiture or impairment of any rights thereunder
and without the consent, approval or act of, or the making of any filing with,
any other party. Each of the Company and its Subsidiaries has fulfilled and
performed in all material respects its obligations under each of the Company
Agreements, and neither the Company nor any Subsidiary of the Company is in, or
alleged in writing to be in, breach or default under any of the Company
Agreements and, to the Knowledge of the Company, no other party to any of the
Company Agreements has breached or defaulted thereunder, and no event has
occurred and no condition or state of facts exists which, with the passage of
time or the giving of notice or both, would constitute such a default or breach
by the Company or any Subsidiary of the Company, to the Knowledge of the
Company, by any such other party. Complete and correct copies of each of the
Company Agreements have heretofore been made available to Parent.
Section 3.22 Insurance. Section 3.22 of the Company Letter sets forth a
list of insurance maintained, owned or held by the Company or any Subsidiary.
The Company and its Subsidiaries shall keep or cause such insurance or
comparable insurance in full force and effect through the Effective Time. Each
of the Company and its Subsidiaries has complied with each of such insurance
policies and has not failed to give any notice or present any claim thereunder
in a due and timely manner except for any non-compliance or failure that would
not, individually or in the aggregate, have a Material Adverse Effect on the
Company.
Section 3.23 Budgets. Section 3.23 of the Company letter sets forth (a) as
of the date hereof the budgets of capital, payroll and other expenditures of the
<PAGE>
Company and its Subsidiaries prepared in the ordinary course of its business for
the fiscal year ending December 31, 2000 and (b) the total capital expenditures
through July 31, 2000, if any, for each capital expenditure project for which
funds are proposed to be expended during 2000.
Section 3.24 Takeover Statutes and Charter Provisions. To the Knowledge of
the Company, no state takeover statutes or charter or bylaw provisions are
applicable to the Merger, this Agreement, the Stockholder Agreements, the Parent
Ancillary Agreements and the Company Ancillary Agreements, and the transactions
contemplated hereby and thereby.
Section 3.25 Required Vote of Company Stockholders. The affirmative vote of
the holders of a majority of the outstanding shares of Company Common Stock is
required to adopt this Agreement. No other vote of the securityholders of the
Company is required by law, the Company Charter or the Company Bylaws or
otherwise in order for the Company to consummate the Merger and the transactions
contemplated hereby and by the Parent Ancillary Agreements and the Company
Ancillary Agreements.
Section 3.26 Opinion of Financial Advisor. The Company has received the
written opinion of Merrill Lynch & Co., dated the date hereof, to the effect
that, as of the date hereof, the Exchange Ratio is fair to the holders of
Company Common Stock, from a financial point of view, a copy of which opinion
has been delivered to Parent.
Section 3.27 Pooling of Interests; Reorganization. To the Knowledge of the
Company, neither it nor any of its Subsidiaries has (i) taken any action or
failed to take any action which action or failure would jeopardize the treatment
of the Merger as a pooling of interests for accounting purposes or (ii) taken
any action or failed to take any action which action or failure would prevent
the Merger from qualifying as a reorganization within the meaning of Section
368(a) of the Code.
Section 3.28 Brokers. No broker, investment banker or other Person, other
than Merrill Lynch & Co., the fees and expenses of which will be paid by the
Company (as reflected in an agreement between Merrill Lynch & Co. and the
Company, a copy of which has been furnished to Parent), is entitled to any
broker's, finder's or other similar fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Company or any of its Subsidiaries.
<PAGE>
Section 3.29 Hart-Scott-Rodino. The Company is its own sole "ultimate
parent entity" (as defined in 16 C.F.R. Section 801.1(a)(3) (1995)).
Section 3.30 Stockholder Information. None of the information presented to
the Company's stockholders in connection with the solicitation of the
Stockholder Consent (the "Stockholder Information") will, at the time of the
mailing or presentation of such information or at the effective time of the
Stockholder Consent, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading. If at any time prior to the effective time of the
Stockholder Consent any event with respect to the Company, its officers and
directors or any of its Subsidiaries shall occur which is required at that time
to be described in the Stockholder Information in order for this representation
to be true and correct, the Company shall advise Parent and, if requested by
Parent, promptly notify the stockholders of the Company of such event. The
Company will comply with the provisions of the DGCL in seeking the Stockholder
Consent and notifying its stockholders of the taking of such action by consent.
Section 3.31 Investor Qualifications. (a) Each Company Stockholder is an
"accredited" investor as such term is defined in Regulation D promulgated
pursuant to the Securities Act. Each Company Stockholder, by reason of such
Company Stockholder's knowledge in business or financial matters, either alone
or with a Company Stockholder representative, is capable of evaluating the
merits and risks of Company Stockholder's investment in Parent Common Stock, and
will be making an informed investment decision in connection with its
acquisition of the Parent Common Stock and the Stockholder Consent. (b) Each
Company Stockholder is acquiring or will be acquiring the Parent Common Stock
for investment for such Company Stockholder's own account, not as a nominee or
agent, for investment purposes only and not with the view to, or for resale in
connection with, any distribution thereof. Each Company Stockholder understands
that any offer and sale of the Parent Common Stock pursuant hereto has not been,
and will not be, registered under the Securities Act by reason of Parent's
reliance on a specific exemption from the registration provisions of the
Securities Act that depends upon, among other things, the bona fide nature of
the investment intent of the Company Stockholders and the accuracy of the
representations as expressed herein. Each Company Stockholder, if other than a
natural person, has not been formed for the specific purpose of acquiring the
Parent Common Stock. (c) There are substantial restrictions on the
<PAGE>
transferability of the Parent Common Stock. The Parent Common Stock is not, and
Company Stockholders have no right (other than as set forth in the Registration
Rights Agreement) to require that the Parent Common Stock be registered under
the Securities Act. Accordingly, Company Stockholders may have to hold the
Parent Common Stock indefinitely and it may not be possible for Company
Stockholders to liquidate their Parent Common Stock. (d) No Company Stockholder
will be acquiring the Parent Common Stock as a result of or subsequent to any
advertisement, article, notice or other communication published in any
newspaper, magazine or similar media or broadcast over television or radio, or
presented at any seminar or meeting, or any solicitation of purchase by a person
not previously known to the Company Stockholders in connection with investments
in securities generally. (e) The Parent Common Stock acquired hereunder may not
be offered, sold, or otherwise transferred, pledged or hypothecated unless (i)
such Parent Common Stock shall have been registered under the Securities Act and
any and all such other applicable laws or (ii) Parent receives an opinion of
counsel, in form and substance satisfactory to Parent, to the effect that
registration of such securities is not required.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 4.1 Conduct of Business Pending the Merger. (a) Except as expressly
permitted by clauses (i) through (xvii) of this Section 4.1, during the period
from the date of this Agreement through the Effective Time, the Company shall,
and shall cause each of its Subsidiaries to, in all material respects carry on
its business in the ordinary course of its business as currently conducted and,
to the extent consistent therewith, use commercially reasonable efforts to
preserve intact its current business organizations, keep available the services
of its current officers and employees and preserve its relationships with
customers, suppliers and others having business dealings with it to the end that
its goodwill and ongoing business shall be unimpaired at the Effective Time.
Without limiting the generality of the foregoing, and except as otherwise
expressly contemplated by this Agreement, the Company shall not, and shall not
permit any of its Subsidiaries to, without the prior written consent of Parent:
(i) (A) declare, set aside or pay any dividends on, or make any other actual,
constructive or deemed distributions in respect of, any of its capital stock, or
otherwise make any payments to its stockholders in their capacity as such (other
than dividends by the Company's Subsidiaries to the Company), (B) split, combine
or reclassify any of its capital stock or issue or authorize the issuance of any
<PAGE>
other securities in respect of, in lieu of or in substitution for shares of its
capital stock or (C) purchase, redeem or otherwise acquire any shares of capital
stock of the Company or any other securities thereof or any rights, warrants or
options to acquire any such shares or other securities; (ii) issue, deliver,
sell, pledge, dispose of or otherwise encumber any shares of its capital stock,
any other equity interests or equity equivalent or any securities convertible
into, or any rights, warrants or options to acquire any such shares, equity
interests, equity equivalent or convertible securities, other than the issuance
of shares of Company Common Stock pursuant to the Company Stock Options
outstanding as of the date of this Agreement, in each case, in accordance with
its current terms; (iii) amend the Company Charter or Company Bylaws or other
comparable charter or organizational documents of any of its Subsidiaries; (iv)
acquire or agree to acquire by merging or consolidating with, or by purchasing a
substantial portion of the assets of or equity in, or by any other manner, any
business or any corporation, limited liability company, partnership, association
or other business organization or division thereof or otherwise acquire or agree
to acquire any assets, other than assets acquired in the ordinary course of
business consistent with past practice and not material to the Company and its
Subsidiaries taken as a whole; (v) sell, transfer, lease, license, mortgage,
pledge, encumber or otherwise dispose of any of its properties or assets, other
than sales, leases or licenses of products or services in the ordinary course of
business consistent with past practice and other than sales, leases or licenses
of products or services involving less than $50,000 in the aggregate; (vi) incur
any indebtedness for borrowed money, guarantee any such indebtedness or make any
loans, advances or capital contributions to, or other investments in, any other
Person, other than (A) indebtedness for borrowed money under its Credit
Agreement, dated as of March 24, 1998, between the Company and certain of its
Subsidiaries and First Union National Bank, as amended, provided that the
aggregate principal amount outstanding at any time under such agreement would
not exceed $15.9 million, (B) indebtedness, guarantees, loans, advances, capital
contributions and investments between the Company and any of its wholly-owned
Subsidiaries or between any of such wholly-owned Subsidiaries, (C) cash
management activities carried on in the ordinary course of business consistent
with past practice, and (D) advances to employees for travel and related
business expenses consistent with Company policies and past practices; (vii)
alter (through merger, liquidation, reorganization, restructuring or in any
other fashion) the corporate structure or ownership of the Company or any
Subsidiary; (viii) enter into, adopt or amend any severance plan, agreement or
arrangement, Company Plan or employment or consulting agreement, including,
without limitation, the Company Stock Options; (ix) except as set forth in
<PAGE>
Section 4.1(a)(ix) of the Company Letter, increase the compensation or benefits
payable or to become payable to its directors, officers or employees or grant
any severance or termination pay to, or enter into or amend any employment or
severance agreement with, any current or former director or officer of the
Company or any of its Subsidiaries, except, in case of employees other than
directors or officers, in the ordinary course of business consistent with the
Company's past practice in connection with annual compensation reviews but in no
event to exceed a 5% increase in the aggregate, or establish, adopt, enter into,
or, except as may be required to comply with applicable law, amend or take
action to enhance or accelerate any rights or benefits under, any labor, bonus,
profit sharing, thrift, compensation, stock option, restricted stock, pension,
retirement, deferred compensation, employment, termination, severance or other
plan, agreement, trust, fund, policy or arrangement, including the Company Stock
Plan, for the benefit of any current or former director, officer or employee;
(x) knowingly violate or knowingly fail to perform any obligation or duty
imposed upon it or any Subsidiary by any applicable material federal, state or
local law, rule, regulation, guideline or ordinance; (xi) make any change to
accounting policies or procedures (other than actions required to be taken by
GAAP); (xii) except as set forth in Section 4.1(a)(xii) of the Company Letter,
prepare or file any Tax Return inconsistent with past practice or, on any such
Tax Return, take any position, make any election, or adopt any method that is
inconsistent with positions taken, elections made or methods used in preparing
or filing similar Tax Returns in prior periods; (xiii) settle or compromise any
material federal, state, local or foreign income Tax liability; (xiv) enter
into, amend, waive any rights under or terminate (a) any agreement or contract
material to the Company and its Subsidiaries, taken as a whole, (b) any Member
Agreement, (c) any noncompetition agreement, or (d) any agreement pursuant to
which any third party is granted marketing, distribution, manufacturing or any
other related rights with respect to any Company product, services, processes or
technology; or, except as set forth in Section 4.1(a)(xiv) of the Company
Letter, incur, make or agree to make any new capital expenditure or expenditures
which, individually, is in excess of $50,000 or, in the aggregate, are in excess
of $200,000; (xv) waive or release any material right or claim, or pay,
discharge or satisfy any material claims, liabilities or obligations (whether
absolute, accrued, asserted or unasserted, contingent or otherwise), other than
the payment, discharge or satisfaction, in the ordinary course of business
consistent with past practice or in accordance with their terms, of liabilities
reflected or reserved against in the Balance Sheet or incurred in the ordinary
course of business consistent with past practice; (xvi) initiate, settle or
compromise any litigation or arbitration proceeding; (xvii) permit any director
<PAGE>
of the Company to hold any shares of Company Common Stock or, other than the
Company Stock Options owned by Ronald V. Congemi as of the date hereof, permit
any director of the Company to be granted or to hold any Company Stock Options;
or (xviii) authorize, recommend, propose or announce an intention to do any of
the foregoing, or enter into any contract, agreement, commitment or arrangement
to do any of the foregoing.
Section 4.2 No Solicitation. (a) From the date hereof until the earlier of
the Effective Time or the date on which this Agreement is terminated in
accordance with the terms hereof, the Company shall not, nor shall it authorize
or permit any of its Subsidiaries to, nor shall it authorize or permit any
officer, director or employee of, or any financial advisor, attorney or other
advisor or representative of, the Company or any of its Subsidiaries to (i)
solicit, initiate or encourage the submission of, any Takeover Proposal (as
hereafter defined), (ii) enter into any agreement with respect to any Takeover
Proposal or (iii) participate in any discussions or negotiations regarding, or
furnish to any Person any information with respect to, or take any other action
to facilitate any inquiries or the making of any proposal that constitutes, or
may reasonably be expected to lead to, any Takeover Proposal; provided, however,
that prior to the effective date of the Stockholder Consent, nothing contained
in this Agreement shall prevent the Company or its Board of Directors from
furnishing non-public information to, or entering into discussions or
negotiations with, any Person in connection with an unsolicited bona fide
written Takeover Proposal by such Person, if and only to the extent that (w)
such Takeover Proposal would, if consummated, result in a transaction that
would, in the reasonable good-faith judgment of the Board of Directors of the
Company, after consultation with its financial advisors, result in a transaction
more favorable to the Company's stockholders from a financial point of view than
the Merger (any such more favorable Takeover Proposal being referred to in this
Agreement as a "Superior Proposal") and, in the reasonable good-faith judgment
of the Board of Directors of the Company, after consultation with its financial
advisors, the Person making such Superior Proposal has the financial means to
conclude such transaction, (x) the failure to take such action would in the
reasonable good-faith judgment of the Board of Directors of the Company, on the
basis of the advice of the outside corporate counsel of the Company, violate the
fiduciary duties of the Board of Directors of the Company to the Company's
stockholders under applicable law, (y) prior to furnishing such non-public
information to, or entering into discussions or negotiations with, such Person,
such Board of Directors receives from such Person an executed confidentiality
agreement with provisions not less favorable to the Company than those contained
<PAGE>
in the Confidentiality Agreement (as defined below) and (z) the Company shall
have fully complied with this Section 4.2. For purposes of this Agreement,
"Takeover Proposal" means any proposal or offer, or any expression of interest,
by any Person other than Parent or Sub relating to the Company's willingness or
ability to receive or discuss a proposal or offer for a merger, consolidation or
other business combination involving the Company or any of its Subsidiaries or
any proposal or offer to acquire in any manner, directly or indirectly, a
substantial equity interest in, a substantial portion of the voting securities
of, or a substantial portion of the assets of the Company or any of its
Subsidiaries, other than the transactions contemplated by this Agreement. (b)
The Company shall advise Parent orally (within one business day) and in writing
(as promptly as practicable) of (i) any Takeover Proposal or any inquiry with
respect to or which could lead to any Takeover Proposal, (ii) the material terms
of such Takeover Proposal and (iii) the identity of the Person making any such
Takeover Proposal or inquiry. The Company will keep Parent informed of the
status and details of any such Takeover Proposal or inquiry.
Section 4.3 Third Party Standstill Agreements. During the period from the
date of this Agreement through the Effective Time, the Company shall not
terminate, amend, modify or waive any provision of any confidentiality agreement
relating to a Takeover Proposal or standstill agreement to which the Company or
any of its Subsidiaries is a party (other than any involving Parent). During
such period, the Company agrees to enforce, to the fullest extent permitted
under applicable law, the provisions of any such agreements, including, but not
limited to, obtaining injunctions to prevent any breaches of such agreements and
to enforce specifically the terms and provisions thereof in any court of the
United States or any state thereof having jurisdiction.
Section 4.4 Pooling of Interests; Reorganization. During the period from
the date of this Agreement through the Effective Time, unless the other party
shall otherwise agree in writing, none of Parent, the Company or any of their
respective Subsidiaries shall (a) knowingly take or fail to take any action,
which action or failure would jeopardize the treatment of the Merger as a
pooling of interests for accounting purposes or (b) knowingly take or fail to
take any action, which action or failure would prevent the Merger from
qualifying as a reorganization within the meaning of Section 368(a) of the Code.
Between the date of this Agreement and the Effective Time, Parent and the
Company each shall take, or cause to be taken, all actions reasonably necessary
in order for the Merger to be treated as a pooling of interests for accounting
purposes.
<PAGE>
ARTICLE V
ADDITIONAL AGREEMENTS
Section 5.1 Stockholder Consent. (a) The Company will, as soon as
practicable following the date of this Agreement, duly submit to its
stockholders this Agreement for the purpose of considering the approval of this
Agreement and the Merger, all in accordance with the DGCL, the Company Charter
and the Company Bylaws. The Company will, through its Board of Directors,
recommend to its stockholders the approval and adoption of this Agreement and
shall use all commercially reasonable efforts (including direction from the
Company's Board of Directors that the stockholders take such action by written
consent in accordance with the Company Charter) to solicit such approval by its
stockholders in the form of a written consent in form and substance reasonably
acceptable to Parent (the "Stockholder Consent"). In connection with soliciting
such consent, the Company and Parent shall promptly prepare an information
statement. Parent and the Company shall furnish all information concerning
Parent or the Company, as the case may be, as may be reasonably requested in
connection with such information statement. If at any time prior to the
effective time of the Stockholder Consent, any information relating to the
Company or Parent, or any of their respective affiliates, officers or directors,
should be discovered by the Company or Parent which should be set forth in an
amendment or supplement to such information statement, so that such document
would not include any misstatement of a material fact or omit to state any
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, the party which
discovers such information shall promptly notify the other party and an
appropriate amendment or supplement prepared by Parent and the Company
describing such information shall be, to the extent required by law,
disseminated by the Company to the stockholders of the Company. The Company's
Board of Directors shall not withdraw or modify, or propose to withdraw or
modify in a manner adverse to Parent, such recommendation. The Company agrees to
submit this Agreement and such information statement to its stockholders for
approval whether or not the Board of Directors of the Company determines at any
time subsequent to the date hereof that this Agreement is no longer advisable
and recommends that the stockholders of the Company reject it. The Company shall
use commercially reasonable efforts to obtain the Stockholder Consent no later
than 45 days after the date hereof. (b) As promptly as practicable after
obtaining the Stockholder Consent, but in no event later than 20 business days
<PAGE>
prior to the Closing Date, the Company shall notify each of its stockholders who
is entitled to appraisal rights of the approval of the Merger and that appraisal
rights are available, pursuant to Section 262 of the DGCL. Such notice shall be
in a form reasonably acceptable to Parent. The Company shall advise Parent as
promptly as practicable of any notice received from any stockholder of the
Company purporting to demand the appraisal of such stockholder's shares of
Company Common Stock.
Section 5.2 Access to Information. Subject to contractual and legal
restrictions applicable to the Company or any of its Subsidiaries, the Company
shall, and shall cause each of its Subsidiaries to, afford to the accountants,
counsel, financial advisors and other representatives of Parent reasonable
access to, and permit them to make such inspections as they may reasonably
require of, during normal business hours during the period from the date of this
Agreement through the Effective Time, all of its employees, customers,
properties, assets, books, contracts, commitments and records (including,
without limitation, the work papers of independent accountants, if available and
subject to the consent of such independent accountants) and, during such period,
the Company shall, and shall cause each of its Subsidiaries to, furnish promptly
to Parent all information concerning its business, properties, assets and
personnel as Parent may reasonably request. Parent shall afford to the
accountants, counsel, financial advisors and other representatives of the
Company reasonable access to the executive officers of Parent during normal
business hours during the period from the date of this Agreement through the
Effective Time. No investigation pursuant to this Section 5.2 shall affect any
representation or warranty in this Agreement of any party hereto or any
condition to the obligations of the parties hereto. All information obtained
pursuant to this Section 5.2 shall be kept confidential in accordance with the
Confidentiality Agreement, dated July 12, 2000 between Parent and the Company
(the "Confidentiality Agreement").
Section 5.3 Fees and Expenses. Except as provided in this Section 5.3 and
Section 5.7, whether or not the Merger is consummated, all costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby including, without limitation, the fees and disbursements of counsel,
financial advisors and accountants, shall be paid by the party incurring such
costs and expenses, provided that all printing expenses and all filing fees
(including, without limitation, filing fees under the Bank Act and the HSR Act)
shall be divided equally between Parent and the Company.
<PAGE>
Section 5.4 Company Stock Plan. (a) At the Effective Time, each Company
Stock Option which is outstanding immediately prior to the Effective Time
pursuant to the Company Stock Plan shall become and represent an option to
purchase the number of shares of Parent Common Stock (a "Substitute Option")
(decreased to the nearest full share) determined by multiplying (i) the number
of shares of Company Common Stock subject to such Company Stock Option
immediately prior to the Effective Time by (ii) the Exchange Ratio at an
exercise price per share of Parent Common Stock (rounded up to the nearest tenth
of a cent) equal to the exercise price per share of Company Common Stock
immediately prior to the Effective Time divided by the Exchange Ratio. With
respect to Company Stock Options that are not Incentive Stock Options (as
defined in Section 422 of the Code), Parent shall pay cash to holders of Company
Stock Options in lieu of issuing fractional shares of Parent Common Stock upon
the exercise of Substitute Options for shares of Parent Common Stock. After the
Effective Time, except as provided above in this Section 5.4, each Substitute
Option shall be exercisable upon the same terms and conditions as were
applicable under the related Company Stock Option at the Effective Time.
Notwithstanding anything in Section 5.4 to the contrary, the adjustments
provided therein with respect to any Company Stock Options that are Incentive
Stock Options shall be effected in a manner consistent with the requirements of
Section 424(a) of the Code. The Company shall take all necessary action to
implement the provisions of this Section 5.4(a) including, without limitation,
any action necessary or advisable to be taken by the Committee (as such term is
defined in the Company Stock Plan). (b) Any shares of Company Common Stock
issued upon exercise of options under the Company Stock Plan have been issued in
compliance with all appropriate securities laws and are subject to all
appropriate restrictions on transfer in connection with such laws. (c) As soon
as reasonably practicable after the Effective Time but in any event within 30
days after the Effective Time, Parent shall file a registration statement on
Form S-8 (or any successor or other appropriate form) with respect to Parent
Common Stock subject to Substitute Options, or shall cause such Substitute
Options to be deemed to be issued pursuant to a Parent Stock Plan for which
shares of Parent Common Stock have been previously registered pursuant to an
appropriate registration form. In addition to any requirement of the Company
Stock Plan, any Parent Common Stock issued upon exercise of a Company Stock
Option prior to effectiveness of such registration statement shall bear the
legend set forth in Section 1.6(b).
Section 5.5 Commercially Reasonable Efforts; Pooling of Interests. (a) Upon
the terms and subject to the conditions set forth in this Agreement, each of the
<PAGE>
parties agrees to use commercially reasonable efforts to take, or cause to be
taken, all actions, and to do, or cause to be done, and to assist and cooperate
with the other parties in doing, all things necessary, proper or advisable to
consummate and make effective, in the most expeditious manner practicable, the
Merger and the other transactions contemplated by this Agreement, including, but
not limited to using commercially reasonable efforts for the purpose of: (i)
obtaining all necessary actions or non-actions, waivers, consents and approvals
from all Governmental Entities and making all necessary registrations and
filings (including filings with Governmental Entities) and taking all reasonable
steps as may be necessary to obtain an approval or waiver from, or to avoid an
action or proceeding by, any Governmental Entity (including those in connection
with the HSR Act, the Bank Act and State Takeover Approvals), (iii) obtaining
all necessary consents, approvals or waivers from third parties, (iv) taking,
together with their respective accountants, all actions reasonably necessary in
order to obtain a favorable determination (if required) from the SEC that the
Merger may be accounted for as a pooling of interests in accordance with GAAP,
and (v) executing and delivering any additional instruments necessary to
consummate the transactions contemplated by this Agreement. (b) Each party shall
use all commercially reasonable efforts to not take any action, or enter into
any transaction, which would cause any of its representations or warranties
contained in this Agreement to be untrue or result in a breach of any covenant
made by it in this Agreement. (c) Notwithstanding anything to the contrary
contained in this Agreement (including without limitation this Section 5.5),
Parent shall have no obligation to oppose, challenge or appeal any suit, action
or proceeding by any Governmental Entity before any court or governmental
authority, agency or tribunal, domestic or foreign (i) seeking to restrain or
prohibit or restraining or prohibiting the consummation of the Merger or any of
the other transactions contemplated by this Agreement, (ii) seeking to prohibit
or limit or seeking to apply conditions on or prohibiting, limiting or imposing
conditions on the ownership, operation or control by the Company, Parent or any
of their respective Subsidiaries of any portion of the business or assets
(including without limitation any agreement) of the Company, Parent or any of
their respective Subsidiaries or that otherwise would have, individually or in
the aggregate, an adverse effect on Parent, the Company or any of their
respective Subsidiaries, or (iii) seeking to compel or compelling the Company,
Parent or any of their respective Subsidiaries to dispose of, grant rights in
respect of, or hold separate any portion of the business or assets (including
without limitation any agreement) of the Company, Parent or any of their
respective Subsidiaries. Parent shall have no obligation to commence any suit,
action or proceeding in any court or before any governmental authority, agency
<PAGE>
or tribunal, domestic or foreign, in connection with the transactions
contemplated by this Agreement. Further, notwithstanding anything to the
contrary contained in this Agreement, (including without limitation this Section
5.5), Parent shall have no obligation (i) to dispose of, hold separate or grant
any rights in respect of, any portion of the business or assets (including
without limitation any agreement) of the Company, Parent or any of their
respective Subsidiaries, or (ii) to agree to any limitations or conditions with
respect to any portion of the business or assets (including without limitation
any agreement) of the Company, Parent or any of their respective Subsidiaries if
such limitations or conditions, either alone or together with any other factors,
in the good faith opinion of Parent, would have a Material Adverse Effect on the
Company, Parent or any of their respective Subsidiaries or would detract from
the value of the Merger to Parent in any material manner. Neither the Company
nor any of its Subsidiaries shall take any of the actions described in preceding
sentences of this Section 5.5(c) without the prior written consent of Parent.
(d) Nothing contained in this Section 5.5, shall limit or restrict Parent or any
of its Subsidiaries from entering into or effecting any agreement relating to
any other business combination, acquisition or merger and no such business
combination, acquisition or merger shall be deemed to violate this Section 5.5;
provided, however, that this Section 5.5(d) is not intended to permit Parent to
make any acquisition, by means of merger or otherwise, of assets or securities,
in each case, which could reasonably be expected to prevent or materially delay
obtaining the consents or approvals of any Governmental Entity required under
this Agreement.
Section 5.6 Public Announcements. Parent and the Company will not issue any
press release with respect to the transactions contemplated by this Agreement or
otherwise issue any written public statements with respect to such transactions
without prior consultation with the other party, except as may be required by
applicable law or by obligations pursuant to any listing agreement with any
national securities exchange or the rules of Nasdaq.
Section 5.7 Real Estate Transfer and Gains Tax. Parent and the Company
agree that either the Company or the Surviving Corporation will pay any state or
local tax which is attributable to the transfer of the beneficial ownership of
the Company's or its Subsidiaries' real property, if any (collectively, the
"Gains Taxes"), and any penalties or interest with respect to the Gains Taxes,
payable in connection with the consummation of the Merger. The Company and
Parent agree to cooperate with the other in the filing of any returns with
respect to the Gains Taxes, including supplying in a timely manner a complete
<PAGE>
list of all real property interests held by the Company and its Subsidiaries and
any information with respect to such property that is reasonably necessary to
complete such returns. The portion of the consideration allocable to the real
property of the Company and its Subsidiaries shall be determined by Parent in
its reasonable discretion.
Section 5.8 Transfer Tax Filings. Parent and the Company shall cooperate in
the preparation, execution and filing of all returns, questionnaires,
applications or other documents regarding any real property transfer or gains,
sales, use, transfer, value added, stock transfer and stamp taxes, any transfer,
recording, registration and other fees or any similar taxes ("Transfer Taxes")
which become payable in connection with the transactions contemplated by the
Agreement that are required or permitted to be filed on or before the Effective
Time.
Section 5.9 Other Transfer Taxes. Parent and Company agree that all
Transfer Taxes incurred by Parent, Sub or the Company in connection with the
Merger arising on or after the Effective Time shall be borne by the Surviving
Corporation and shall not be reimbursed directly or indirectly by Parent.
Section 5.10 State Takeover Laws. If any "fair price," "business
combination" or "control share acquisition" statute or other similar statute or
regulation shall become applicable to the transactions contemplated hereby or in
the Company Ancillary Agreements, Parent and the Company and their respective
Boards of Directors shall use their commercially reasonable efforts to grant
such approvals and take such actions as are necessary so that the transactions
contemplated hereby and thereby may be consummated as promptly as practicable on
the terms contemplated hereby and thereby and otherwise act to minimize the
effects of any such statute or regulation on the transactions contemplated
hereby and thereby.
Section 5.11 Indemnification; Directors and Officers Insurance. (a) For six
years after the Effective Time, Parent shall, and shall cause the Surviving
Corporation to, indemnify and hold harmless all past and present directors,
officers, employees or agents of the Company and of its Subsidiaries (each an
"Indemnified Party") to the full extent permitted by law, any outstanding
indemnification agreements listed in Section 5.11 of the Company Letter and the
Company Charter or the Company Bylaws as in effect on the date hereof, in each
case for all acts or omissions occurring at or prior to the Effective Time, and
shall periodically advance litigation expenses reasonably incurred by each such
<PAGE>
person in connection with defending any claim, action or investigation arising
out of such acts or omissions (including the reasonable cost of any
investigation and preparation incurred in connection therewith), subject to such
person providing an undertaking to reimburse all amounts so advanced in the
event of a final non-appealable determination by a court of competent
jurisdiction that such person is not entitled thereto. Parent shall provide, or
shall cause the Surviving Corporation to provide, for an aggregate period of not
less than six years from the Effective Time, the Company's current and former
directors and officers an insurance and indemnification policy that provides
coverage for events existing or occurring prior to the Effective Time (the "D&O
Insurance") that is no less favorable with respect to its limits and deductibles
than the Company's existing policy or, if substantially equivalent insurance
coverage is unavailable, the best available coverage; provided, however, that
the Parent and Surviving Corporation shall not be required to pay an annual
premium for the D&O Insurance in excess of 150% of the last annual premium paid
by the Company prior to the date hereof, but in such case shall purchase as much
coverage as possible for such amount. (b) In the event Parent or any of its
successors or assigns (i) consolidates with or merges into any other Person and
is not the continuing or surviving corporation or entity of such consolidation
or merger or (ii) conveys all or substantially all of its properties and assets
to any Person then, and in each case, proper provision shall be made so that the
successors and assigns of Parent assume the obligations set forth in this
Section 5.11.
Section 5.12 Notification of Certain Matters. Parent shall use its
commercially reasonable efforts to give prompt notice to the Company, and the
Company shall use its commercially reasonable efforts to give prompt notice to
Parent, of: (i) the occurrence, or non-occurrence, of any event the occurrence,
or non-occurrence, of which it is aware and which would be reasonably likely to
cause (x) any representation or warranty contained in this Agreement to be
untrue or inaccurate in any material respect or (y) any covenant, condition or
agreement contained in this Agreement not to be complied with or satisfied in
all material respects, (ii) any failure of Parent or the Company, as the case
may be, to comply in a timely manner with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder. The Company shall
use its reasonable best efforts to give prompt notice to Parent of any change or
event which would be reasonably likely to have a Material Adverse Effect on the
Company. The delivery of any notice pursuant to this Section 5.12 shall not
limit or otherwise affect the remedies available hereunder to the party
receiving such notice.
<PAGE>
Section 5.13 Compliance with the Securities Act. (a) Section 5.13 of the
Company Letter contains a list identifying all Persons who, at the effective
time of the Stockholder Consent, may be deemed to be "affiliates" of the Company
as that term is used in paragraphs (c) and (d) of Rule 145 under the Securities
Act, other than directors of the Company who do not own any Company Common Stock
or Company Stock Options (the "Rule 145 Affiliates"). The Company shall use its
commercially reasonable efforts to cause each Person who is identified as a Rule
145 Affiliate in such list to execute and deliver to Parent within 30 days of
the date hereof a written agreement in substantially the form of Exhibit B
hereto (the "Company Affiliate Letter"). Prior to the Effective Time, if
required, the Company shall amend and supplement Section 5.13 of the Company
Letter and use its commercially reasonable efforts to cause each additional
Person who is identified as a Rule 145 Affiliate of the Company to execute a
Company Affiliate Letter. Parent shall be entitled to place appropriate legends
on the certificates evidencing any Parent Common Stock to be received by
affiliates of the Company pursuant to this Agreement and to issue appropriate
stop transfer instructions to the transfer agent for the Parent Common Stock,
consistent with the terms of the Company Affiliate Letter. (b) Section 5.13 of
the Parent Letter contains a list identifying those Persons who may be, at the
effective time of the Stockholder Consent, affiliates of Parent under applicable
SEC accounting releases with respect to pooling of interests accounting
treatment. Parent shall use its commercially reasonable efforts to enter into a
written agreement in substantially the form of Exhibit C hereto (the "Parent
Affiliate Letter") within 30 days of the date hereof with each of such Persons
identified in the foregoing list. Prior to the Effective Time, if required,
Parent shall amend and supplement Section 5.13 of the Parent Letter and use its
reasonable best efforts to cause each additional Person who is identified
therein as an affiliate of Parent to execute the Parent Affiliate Letter.
Section 5.14 Registration Rights Agreement. Parent agrees to enter into a
Registration Rights Agreement (the "Registration Rights Agreement"), in the form
of the attached Exhibit D, with each of the stockholders of the Company who or
which elects to become a party thereto by giving Parent written notice to such
effect no later than 60 days after the date hereof.
Section 5.15 Employee Matters. To the extent any Parent Plan (or any plan
of the Surviving Corporation) shall be made applicable to any employee or former
employee of the Company, Parent shall, or shall cause the Surviving Corporation
to, grant to employees and former employees of the Company credit for service
<PAGE>
with the Company and its Subsidiaries (or service credited by the Company and
its Subsidiaries) for the purposes of determining eligibility to participate in
such plan and the employee's nonforfeitable interest in benefits thereunder and
for purposes of calculating benefits thereunder (but subject to offset, if
necessary, to avoid duplication of benefits). Parent shall (i) waive (or cause
to be waived) any pre-existing condition limitations that might otherwise apply
to employees or former employees of the Company and its Subsidiaries unless not
waived under the Company's equivalent plan and (ii) recognize (or cause to be
recognized) the dollar amount of all expenses incurred by employees or former
employees of the Company and its Subsidiaries during the calendar year in which
the Effective Time occurs for purposes of satisfying the calendar year
deductions and co-payment limitations for such year, under the relevant welfare
benefit plans of Parent or the Surviving Corporation. Nothing in this Agreement
shall be interpreted as limiting the power of the Surviving Corporation to amend
or terminate any Company Plan or any other employee benefit plan, program,
agreement or policy in accordance with its terms or as requiring the Surviving
Corporation or Parent to offer or to continue (other than as required by its
terms) any written employment contract.
Section 5.16 Advisory Committee. (a) Except as otherwise limited by any
applicable law, regulation, rule, ordinance, judgment, order or decree or
otherwise required by any Government Entity, Parent will establish, following
the Closing, a Network Advisory Board (the "Advisory Board") of senior
executives of financial institution members of the MAC(r) and Star System(r)
Networks (collectively, the "Network"). The selection and terms of service of
the members of the Advisory Board shall be at Parent's sole discretion. The
Advisory Board shall expire on December 31, 2010. (b) Parent shall give prior
written notice to the Advisory Board of changes proposed by Parent to (i) the
operating rules governing the Network from any combination of the MAC(r) Network
Rules and Regulations and the Star Systems, Inc. Operating Rules existing on the
Closing Date or (ii) the external interchange rates and fees (ATM and POS)
payable between, or passed through to, Network participants. The Advisory Board,
by a majority vote of the entire Advisory Board, may veto any such proposed
change prior to the effective date of such proposed change. The Advisory Board
also may propose changes to Network operating rules and pricing, which shall be
considered by Parent in its sole discretion. (c) If, after the Closing Date, the
Network offers new products or services under the Network brand, Parent shall
give prior written notice to the Advisory Board of the establishment or
modification of the pricing of transactions for such products or services
between Network participants. The Advisory Board, by a majority vote of the
<PAGE>
entire Advisory Board, may veto any such proposed pricing prior to the effective
date of such proposed change. (d) Parent shall retain sole authority to set fees
payable to any legal entity operating the Network. (e) Parent considers
point-to-point transfers, electronic check services and Internet debit services
to be significant strategic initiatives for the Network and will make reasonable
efforts to develop and support such transactions.
Section 5.17 Directorship. At the first meeting of the Board of Directors
of Parent following the Effective Time, Parent's Board of Directors shall elect
Ronald V. Congemi to be a director of Parent so that immediately thereafter, the
Board of Directors of Parent shall consist of ten directors.
ARTICLE VI
CONDITIONS PRECEDENT TO THE MERGER
Section 6.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligations of each party to effect the Merger shall be subject to
the fulfillment at or prior to the Effective Time of the following conditions:
(a) Stockholder Approval. This Agreement shall have been duly approved by the
requisite vote of stockholders of the Company in accordance with applicable law
and the Company Charter and Company Bylaws. (b) Certain Approvals. All approvals
to be obtained by Parent, Sub or the Company required under the Bank Act shall
have been received and the waiting period (and any extension thereof) applicable
to the consummation of the Merger under the HSR Act shall have expired or been
terminated. (c) No Order. Neither any court nor any other Governmental Entity
having jurisdiction over the Company or Parent, or any of their respective
Subsidiaries, shall have enacted, issued, promulgated, enforced or entered any
law, rule, regulation, executive order, decree, injunction or other order
(whether temporary, preliminary or permanent) which is then in effect and has
the effect of making the Merger or any of the transactions contemplated hereby
illegal. (d) Accounting. The Company shall have received the written opinion,
dated as of the Effective Time, of Deloitte & Touche LLP that the Company is
eligible to be a party to a business combination accounted for as a pooling of
interests in accordance with GAAP and applicable published rules and regulations
of the SEC. Parent shall have received the written opinion, dated as of the
Effective Time, of Ernst & Young LLP that Parent is eligible to be a party to a
business combination accounted for as a pooling of interests in accordance with
GAAP and applicable published rules and regulations of the SEC, and that the
Merger will qualify for pooling of interests accounting. Each of such written
<PAGE>
opinions will be in form and substance reasonably satisfactory to the Parent.
(e) Certain Governmental Consents. All authorizations, consents, orders,
declarations or approvals of, or filings with, or terminations or expirations of
waiting periods imposed by, any Governmental Entity, which the failure to
obtain, make or occur would have the effect of making the Merger or any of the
transactions contemplated hereby or by any of the agreements delivered in
connection herewith a violation of law by Parent, Sub or the Company shall have
been obtained, shall have been made or shall have occurred.
Section 6.2 Condition to Obligation of the Company to Effect the Merger.
The obligation of the Company to effect the Merger shall be subject to the
fulfillment at or prior to the Effective Time of the following additional
conditions: (a) Performance of Obligations; Representations and Warranties. Each
of Parent and Sub shall have performed in all material respects each of its
agreements contained in this Agreement required to be performed on or prior to
the Effective Time, each of the representations and warranties of Parent and Sub
contained in this Agreement that is qualified by materiality shall be true and
correct on and as of the Effective Time as if made on and as of such date (other
than representations and warranties which address matters only as of a certain
date which shall be true and correct as of such certain date) and each of the
representations and warranties that is not so qualified shall be true and
correct in all material respects on and as of the Effective Time as if made on
and as of such date (other than representations and warranties which address
matters only as of a certain date which shall be true and correct in all
material respects as of such certain date), in each case except as contemplated
or permitted by this Agreement, and the Company shall have received a
certificate signed on behalf of Parent by its Chief Executive Officer and its
Chief Financial Officer to such effect. (b) Tax Opinion. The Company shall have
received an opinion of Skadden, Arps, Slate, Meagher & Flom LLP, in form and
substance reasonably satisfactory to the Company, dated the Effective Time,
substantially to the effect that on the basis of facts, representations and
assumptions set forth in such opinion which are consistent with the state of
facts existing as of the Effective Time, for United States federal income tax
purposes, the Merger will constitute a "reorganization" within the meaning of
Section 368(a) of the Code. In rendering such opinion, Skadden, Arps, Slate,
Meagher & Flom LLP may rely upon the representations contained herein and may
receive and rely upon representations from Parent and its Subsidiaries, the
Company and its Subsidiaries, and others.
Section 6.3 Conditions to Obligations of Parent and Sub to Effect the
<PAGE>
Merger. The obligations of Parent and Sub to effect the Merger shall be subject
to the fulfillment at or prior to the Effective Time of the following additional
conditions: (a) Performance of Obligations; Representations and Warranties. The
Company shall have performed in all material respects each of its agreements
contained in this Agreement required to be performed on or prior to the
Effective Time, each of the representations and warranties of the Company
contained in this Agreement that is qualified by materiality shall be true and
correct on and as of the Effective Time as if made on and as of such date (other
than representations and warranties which address matters only as of a certain
date which shall be true and correct as of such certain date) and each of the
representations and warranties that is not so qualified shall be true and
correct in all material respects on and as of the Effective Time as if made on
and as of such date (other than representations and warranties which address
matters only as of a certain date which shall be true and correct in all
material respects as of such certain date), in each case except as contemplated
or permitted by this Agreement, and Parent shall have received a certificate
signed on behalf of the Company by its Chief Executive Officer and its Chief
Financial Officer to such effect. (b) Tax Opinion. Parent shall have received an
opinion of Sidley & Austin, in form and substance reasonably satisfactory to
Parent, dated the Effective Time, substantially to the effect that on the basis
of facts, representations and assumptions set forth in such opinion which are
consistent with the state of facts existing as of the Effective Time, for United
States federal income tax purposes, the Merger will constitute a
"reorganization" within the meaning of Section 368(a) of the Code. In rendering
such opinion, Sidley & Austin may rely upon representations contained herein and
may receive and rely upon representations from Parent and its Subsidiaries, the
Company and its Subsidiaries, and others. (c) No Changes or Material Adverse
Effect. Since the Balance Sheet Date through the Effective Time, there shall not
have been (i) any Material Adverse Change in the Company, or (ii) any material
adverse federal or state legislative or regulatory event affecting the Company's
business or its products or services. Parent shall have received a certificate
signed on behalf of the Company by its Chief Executive Officer and its Chief
Financial Officer to such effect. (d) Consents. All authorizations, consents,
orders, declarations or approvals of, or filings with, or terminations or
expirations of waiting periods imposed by, any Governmental Entity, which the
failure to obtain, make or occur would have, individually or in the aggregate, a
significant adverse effect on Parent or any of its Subsidiaries (assuming the
Merger had taken place) or a Material Adverse Effect on the Company or any of
its Subsidiaries, shall have been obtained, shall have been made or shall have
occurred. Further, the Company shall have obtained the consent or approval of
<PAGE>
each Person that is not a Governmental Entity whose consent or approval shall be
required in connection with the transactions contemplated hereby under any loan
or credit agreement, note, mortgage, indenture, lease or other material
agreement or instrument by which the Company or any of its Subsidiaries is
bound, including without limitation, each consent or approval described in
Section 3.4 of the Company Letter. (e) No Litigation or Injunction. There shall
not be instituted or pending any suit, action or proceeding by any Governmental
Entity relating to this Agreement, any of the Company Ancillary Agreements or
Parent Ancillary Agreements or any of the transactions contemplated herein or
therein. No action or proceeding shall have been commenced seeking any temporary
restraining order, preliminary or permanent injunction or other order from any
court of competent jurisdiction or seeking any other legal restraint or
prohibition preventing the consummation of the Merger or any of the other
transactions contemplated by this Agreement other than any of the foregoing
which shall have been dismissed with prejudice. (f) Capital Structure
Certificate. The Company shall have delivered a certificate of its Chief
Executive Officer and its Chief Financial Officer setting forth all of the
information that would have been required to have been included in Section
3.2(c) of the Company Letter if the Agreement were dated as of the Effective
Time. (g) Dissenting Stockholders. The Dissenting Shares shall include no more
than five percent (5%) of the shares of Company Common Stock outstanding
immediately prior to the Effective Time. Parent shall have received a
certificate signed on behalf of the Company by its Chief Executive Officer and
its Chief Financial Officer to such effect. Payments with respect to Dissenting
Shares, if any, shall be made by the Company solely with its own funds, and the
Company shall not be reimbursed therefor by Parent or any of its Subsidiaries
either directly or indirectly. (h) Stockholder Approval. This Agreement shall
have been duly approved by holders of 94.99% of the issued and outstanding
shares of Company Common Stock. Parent shall have received a certificate signed
on behalf of the Company by its Chief Executive Officer and its Secretary to
such effect. (i) Processing Agreement. At or prior to November 1, 2000, the
Company and/or Star Networks, Inc., as appropriate, shall have entered into an
agreement with eFunds to terminate the ATM Processing Agreement, dated June 21,
2000, between Star Networks, Inc. and eFunds Corporation, effective at the
Closing, on terms reasonably acceptable to Parent. (j) Employment Agreements.
(i) Each of the executives listed on Schedule 6.3(j) who are parties to an
Amendment to Employment Agreement (collectively, the "Employment Agreement
Amendments"), in the form of the attached Exhibit E, entered into between the
Company and each such executive on the date hereof shall still be employed by
the Company, unless their employment has been terminated as a result of the
<PAGE>
death or disability of any such executive, (ii) the employment agreements
existing between such executives and the Company, as amended by the Employment
Agreement Amendments (collectively and as so amended, the "Employment
Agreements") shall not have been amended, (iii) the Employment Agreements shall
be in full force and effect and the Company shall not have waived any of its
rights thereunder and (iv) there shall have been no assertion by any of the
executives listed in clause (i) hereof or by the Company that any of the
Employment Agreements, in whole or in part, is not effective or is in breach.
Parent shall have received a certificate signed on behalf of the Company by its
Chief Executive Officer and its Secretary to such effect.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
Section 7.1 Termination. This Agreement may be terminated at any time prior
to the Effective Time, whether before or after any approval of the matters
presented in connection with the Merger by the stockholders of the Company: (a)
by mutual written consent of Parent and the Company; (b) by either Parent or the
Company if the other party shall have failed to comply in any material respect
with any of its covenants or agreements contained in this Agreement required to
be complied with prior to the date of such termination, which failure to comply
has not been cured within 30 days following receipt by such other party of
written notice from the non-breaching party of such failure to comply; (c) by
either Parent or the Company if there has been (i) a breach by the other party
(in the case of Parent, including any breach by Sub) of any representation or
warranty that is not qualified as to materiality which has the effect of making
such representation or warranty not true and correct in all material respects or
(ii) a breach by the other party (in the case of Parent, including any breach by
Sub) of any representation or warranty that is qualified as to materiality, in
each case which breach has not been cured within 30 days following receipt by
the breaching party from the non-breaching party of written notice of the
breach; (d) by Parent or the Company if: (i) the Merger has not been effected on
or prior to the close of business on June 30, 2001; provided, however, that
either party may by written notice to the other party delivered on or prior to
June 30, 2001 extend such date until the day immediately preceding the first
anniversary hereof if the failure of the Merger to be effected on or prior to
June 30, 2001 shall have resulted from the failure of the condition set forth in
Section 6.1(b); provided, further, that the right to terminate this Agreement
pursuant to this Section 7.1(d)(i) shall not be available to any party whose
<PAGE>
failure to fulfill any of its obligations contained in this Agreement has been
the cause of, or resulted in, the failure of the Merger to have occurred on or
prior to the aforesaid date; or (ii) any court or other Governmental Entity
having jurisdiction over a party hereto shall have issued an order, decree or
ruling or taken any other action permanently enjoining, restraining or otherwise
prohibiting the transactions contemplated by this Agreement and such order,
decree, ruling or other action shall have become final and nonappealable; (e) by
Parent if the stockholders of the Company do not approve and adopt this
Agreement in an action by written consent no later than 45 days after the date
hereof; (f) by Parent if (i) the Board of Directors of the Company shall not
have recommended, or shall have resolved not to recommend, or shall have
qualified, modified or withdrawn its recommendation of the Merger or declaration
that the Merger is advisable and fair to and in the best interest of the Company
and its stockholders, or shall have resolved to do so, (ii) any Person (other
than Parent or its Affiliates) acquires or becomes the beneficial owner of 10%
or more of the outstanding shares of Company Common Stock (other than as a
result of a bona fide change of control of existing stockholders of the Company,
all of whom are parties to a Stockholder Agreement), (iii) the Board of
Directors of the Company shall have recommended to the stockholders of the
Company any Takeover Proposal or shall have resolved to do so or (iv) a tender
offer or exchange offer for 10% or more of the outstanding shares of capital
stock of the Company is commenced, and the Board of Directors of the Company
fails to recommend against acceptance of such tender offer or exchange offer by
its stockholders (including by taking no position with respect to the acceptance
of such tender offer or exchange offer by its stockholders); (g) by the Company,
upon written notice to Parent, at any time during the five trading day period
after the Determination Date, if both of the following conditions are satisfied:
(1) the Parent Average Price on the Determination Date shall be less than
$24.25; and (2) (i) the number obtained by dividing the Parent Average Price on
the Determination Date by 30.3125 (such number being referred to herein as the
"Parent Ratio") shall be less than (ii) the average of the Index Company Ratios
less 0.15 (such number being referred to herein as the "Index Ratio"); subject,
however, to the following provisions. The Company may withdraw such notice of
termination at any time within the aforementioned five trading day period.
During the five trading day period commencing with its receipt of such notice,
Parent shall have the option to elect to increase the Exchange Ratio to equal
the lesser of (i) the number obtained by dividing (1) 24.25 multiplied by the
Exchange Ratio (as then in effect) by (2) the Parent Average Price on the
Determination Date, and (ii) the number obtained by dividing (1) the product of
the Index Ratio and the Exchange Ratio (as then in effect) by (2) the Parent
<PAGE>
Ratio. Any election by Parent pursuant to the preceding sentence shall be made
by delivery of a written notice to the Company within such five trading day
period and shall specify the revised Exchange Ratio. Upon delivery of such
notice by Parent, no termination shall be deemed to have occurred pursuant to
this Section 7.1(g) and this Agreement shall remain in effect in accordance with
its terms (except as the Exchange Ratio shall have been so modified), and any
references in this Agreement to "Exchange Ratio" shall thereafter be deemed to
refer to the Exchange Ratio as adjusted pursuant to this Section 7.1(g).
Promptly after Parent gives notice of its election to adjust the Exchange Ratio
hereunder, Parent and the Company shall agree on a date to be the Closing Date
under this Agreement, which date shall be not more than five business days after
the date of delivery of such notice by Parent. For purposes of this Section
7.1(g), the following terms shall have the meanings indicated: "Calculation
Period" shall mean the 20 consecutive full trading days ending at the end of the
date in question. "Determination Date" shall mean the tenth trading day prior to
the Closing Date. "Index Company Price" on a given date shall mean the quotient
(calculated to the nearest hundredth) for each company included in the Index
Group of (i) the sum for all trading days during the Calculation Period of (x)
the average of the high and the low sales price as reported in the consolidated
transaction reporting system for the market or exchange on which such common
stock is principally traded (the "Reporting System") of a share of such
company's common stock on each such day, multiplied by (y) the trading volume as
reported on such Reporting System of shares of such company's common stock on
each such day, divided by (ii) the sum of the trading volumes as reported on
such Reporting System of shares of such company's common stock for all such days
during the Calculation Period. "Index Company Ratios" shall mean, for each
company included in the Index Group, the number obtained by dividing the Index
Company Price on the Determination Date by the Index Company Price on the
Starting Date. "Index Group" shall mean, of the six companies listed in Section
7.1 of the Parent Letter, those companies the common stock of which shall be
publicly traded since the Starting Date and until the Determination Date and as
to which there shall not have been, since the Starting Date and before the
Determination Date, any public announcement of a proposal for such company to be
acquired or for such company to acquire another company or companies in
transactions with a value exceeding 25% of the acquiror's market capitalization
as of the Starting Date. "Parent Average Price" on a given date shall equal the
quotient (calculated to the nearest hundredth) of (i) the sum for all trading
days during the Calculation Period of (x) the average of the high and the low
sales price as reported on Nasdaq of a share of Parent Common Stock on each such
day, multiplied by (y) the trading volume as reported on Nasdaq of shares of
<PAGE>
Parent Common Stock on each such day, divided by (ii) the sum of the trading
volumes as reported on Nasdaq of shares of Parent Common Stock for all such days
during the Calculation Period. "Starting Date" shall mean the tenth trading day
prior to the date of this Agreement. If Parent or any company belonging to the
Index Group declares or effects a stock dividend, reclassification,
recapitalization, split-up, combination, exchange of shares, or similar
transaction between the 11th trading day prior to the date of this Agreement and
the Determination Date, the prices for the common stock of such company or
Parent and the other numbers set forth above in this Section 7.1(g) shall be
appropriately adjusted for the purposes of applying this Section 7.1(g); and (h)
by Parent if any Governmental Entity (i) seeks to restrain or prohibit or
restrains or prohibits the consummation of the Merger or any of the other
transactions contemplated by this Agreement, (ii) seeks to prohibit or prohibits
the ownership, operation or control by the Company, Parent or any of their
respective Subsidiaries of any portion of the business or assets (including
without limitation any agreement) of the Company, Parent or any of their
respective Subsidiaries, (iii) seeks to limit or impose any conditions on or
limits or imposes any conditions on the ownership, operation or control by the
Company, Parent or any of their respective Subsidiaries of any portion of the
business or assets (including without limitation any agreement) of the Company,
Parent or any of their respective Subsidiaries or that otherwise, in the good
faith opinion of Parent, individually or in the aggregate, would have a Material
Adverse Effect on Parent, the Company or any of their respective Subsidiaries or
would detract from the value of the Merger to Parent in any material manner, or
(iv) seeks to compel or compels the Company, Parent or any of their respective
Subsidiaries to dispose of, grant rights in respect of, or hold separate any
portion of the business or assets (including without limitation any agreement)
of the Company, Parent or any of their respective Subsidiaries. The right of any
party hereto to terminate this Agreement pursuant to this Section 7.1 shall
remain operative and in full force and effect regardless of any investigation
made by or on behalf of any party hereto, any Person controlling any such party
or any of their respective officers or directors, whether prior to or after the
execution of this Agreement.
Section 7.2 Effect of Termination. In the event of termination of this
Agreement by either Parent or the Company, as provided in Section 7.1, this
Agreement shall forthwith become void and there shall be no liability hereunder
on the part of the Company, Parent, Sub or their respective officers or
directors (except for the last sentence of Section 5.2 and the entirety of
Section 5.3, which shall survive the termination); provided, however, that
<PAGE>
nothing contained in this Section 7.2 shall relieve any party hereto from any
liability for any willful breach of a representation or warranty contained in
this Agreement or the breach of any covenant contained in this Agreement.
Section 7.3 Amendment. This Agreement may be amended by the parties hereto,
by or pursuant to action taken by their respective Boards of Directors, at any
time before or after approval of the matters presented in connection with the
Merger by the stockholders of the Company, but, after any such approval, no
amendment shall be made which by law requires further approval by such
stockholders without such further approval. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto.
Section 7.4 Waiver. At any time prior to the Effective Time, the parties
hereto may (i) extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (ii) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto and/or (iii) waive compliance with any of the agreements or
conditions contained herein which may legally be waived. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in an instrument in writing signed on behalf of such party.
ARTICLE VIII
GENERAL PROVISIONS
Section 8.1 Non-Survival of Representations and Warranties. The
representations and warranties and the covenants required to be performed prior
to the Effective Time in this Agreement or in any instrument delivered pursuant
to this Agreement shall terminate at the Effective Time.
Section 8.2 Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given when delivered personally, one day after
being delivered to an overnight courier or on the business day received (or the
next business day if received after 5 p.m. local time or on a weekend or day on
which banks are closed) when sent via facsimile (with a confirmatory copy sent
by overnight courier) to the parties at the following addresses (or at such
other address for a party as shall be specified by like notice):
(a) if to Parent or Sub, to
<PAGE>
Concord EFS, Inc.
Electronic Payment Services, Inc.
1100 Carr Road
Wilmington, Delaware 19809
Attention: General Counsel
Facsimile No.: (302) 791-8762
with a copy to:
Sidley & Austin
Bank One Plaza
10 South Dearborn Street
Chicago, Illinois 60603
Attention: Imad I. Qasim
Facsimile No.: (312) 853-7036
(b) if to the Company, to
Star Systems, Inc.
P.O. Box 948154 (32794)
2301 Lucien Way, Suite 260
Attention: Chief Financial Officer
Facsimile No.: (407) 659-6767
with a copy to:
Skadden, Arps, Slate, Meagher & Flom, LLP
525 University Avenue
Suite 220
Palo Alto, California 94301
Attention: Kenton J. King
Facsimile No.: (650) 470-4570
Section 8.3 Interpretation. When a reference is made in this Agreement to a
Section, such reference shall be to a Section of this Agreement unless otherwise
indicated. The table of contents, table of defined terms and headings contained
in this Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement. Whenever the words
"include," "includes" or "including" are used in this Agreement, they shall be
<PAGE>
deemed to be followed by the words "without limitation."
Section 8.4 Counterparts. This Agreement may be executed in counterparts,
all of which shall be considered one and the same agreement, and shall become
effective when one or more counterparts have been signed by each of the parties
and delivered to the other parties.
Section 8.5 Entire Agreement; No Third-Party Beneficiaries. This Agreement
and the Confidentiality Agreement constitute the entire agreement and supersede
all prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof. This Agreement, except for
the provisions of Section 5.11, is not intended to confer upon any Person other
than the parties hereto any rights or remedies hereunder.
Section 8.6 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
Section 8.7 Assignment. Subject to Section 1.1, neither this Agreement nor
any of the rights, interests or obligations hereunder shall be assigned by any
of the parties hereto (whether by operation of law or otherwise) without the
prior written consent of the other parties.
Section 8.8 Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law, or public
policy, all other terms, conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic and legal
substance of the transactions contemplated hereby are not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a mutually acceptable manner in
order that the transactions contemplated by this Agreement may be consummated as
originally contemplated to the fullest extent possible.
Section 8.9 Enforcement of this Agreement. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific wording or were
otherwise breached. It is accordingly agreed that the parties hereto shall be
<PAGE>
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions hereof in any court of the
United States or any state having jurisdiction, such remedy being in addition to
any other remedy to which any party is entitled at law or in equity.
IN WITNESS WHEREOF, Parent, Sub and the Company have caused this Agreement
to be signed by their respective officers thereunto duly authorized all as of
the date first written above.
CONCORD EFS, INC.
By:
Name:
Title:
ORION ACQUISITION CORP.
By:
Name:
Title:
<PAGE>
STAR SYSTEMS, INC.
By:
Name:
Title:
Exhibit A
STOCKHOLDER AGREEMENT
STOCKHOLDER AGREEMENT, dated as of October ___, 2000 (this "Agreement"), by
the undersigned stockholder (the "Stockholder") of Star Systems, Inc., a
Delaware corporation (the "Company"), for the benefit of Concord EFS, Inc., a
Delaware corporation ("Parent").
RECITALS
WHEREAS, Parent, Orion Acquisition Corp., a Delaware corporation and a
direct wholly owned subsidiary of Parent ("Sub"), and the Company are entering
into an Agreement and Plan of Merger, dated as of October ___, 2000 (the "Merger
Agreement"), whereby, upon the terms and subject to the conditions set forth in
the Merger Agreement, each issued and outstanding share of Common Stock, par
value $0.01 per share, of the Company ("Company Common Stock"), not owned
directly or indirectly by the Company, will be converted into shares of Common
Stock, par value $0.33 1/3 per share, of Parent ("Parent Common Stock");
WHEREAS, the Stockholder owns of record and/or holds stock options to
acquire (whether or not vested) that number of shares of Company Common Stock
appearing on the signature page hereof (such shares of Company Common Stock,
together with any other shares of capital stock of the Company acquired by such
Stockholder after the date hereof and during the term of this Agreement, being
collectively referred to herein as the "Subject Shares"); and
WHEREAS, as a condition to its willingness to enter into the Merger
Agreement, Parent has required that the Stockholder agree, and in order to
induce Parent to enter into the Merger Agreement the Stockholder has agreed, to
enter into this Agreement. NOW, THEREFORE, in consideration of the promises and
the mutual covenants and agreements set forth herein, the Stockholder agrees as
follows: 1. Covenants of Stockholder. Until the termination of the Stockholder's
obligations in accordance with Section 4, Stockholder agrees as follows: (a)
Stockholder will execute and deliver to the Company the Stockholder Consent no
later than forty-five days following the date hereof. Further, in any other
<PAGE>
circumstances upon which a vote, consent or other approval with respect to the
Merger or the Merger Agreement is sought, the Stockholder shall vote (or cause
to be voted) the Subject Shares in favor of the Merger, the approval and
adoption of the Merger Agreement and the approval of the terms thereof
(including the Merger) and each of the other transactions contemplated by the
Merger Agreement. (b) The Stockholder shall not, nor shall the Stockholder
permit any affiliate, director, officer, employee or other representative of the
Stockholder to (i) directly or indirectly solicit, initiate or knowingly
encourage the submission of, any Takeover Proposal or (ii) directly or
indirectly participate in any discussions or negotiations regarding, or furnish
to any person any information with respect to, or take any other action to
facilitate any inquiries or the making of any proposal that constitutes, or may
reasonably be expected to lead to, any Takeover Proposal. (c) The Stockholder
shall cooperate with Parent to support and to consummate and make effective, in
the most reasonably expeditious manner practicable, the Merger and the other
transactions contemplated by the Merger Agreement. 2. Proxy. (a) Stockholder
hereby irrevocably grants to, and appoints, Edward A. Labry and Dan Palmer or
either of them in their respective capacities as officers of Parent and any
individual who shall hereafter succeed to any such office of Parent and each of
them individually, such Stockholder's proxy and attorney-in-fact (with full
power of substitution), for and in the name, place, and stead of Stockholder, to
vote the Subject Shares or grant a consent or approval in respect of the Subject
Shares in connection with any meeting or action by written consent of the
stockholders of the Company as specified in Section 1(a) hereof. (b) Stockholder
represents that any proxies heretofore given in respect of the Subject Shares
are revocable and that such proxies are hereby revoked. (c) Stockholder hereby
affirms that the irrevocable proxy set forth in this Section 2 is given in
connection with the execution of the Merger Agreement, and that such irrevocable
proxy is given to secure the performance of the duties of Stockholder under this
Agreement. Stockholder hereby further affirms that the irrevocable proxy is
coupled with an interest and may under no circumstances be revoked. Stockholder
hereby ratifies and confirms all that such irrevocable proxy may lawfully do or
cause to be done by virtue hereof. Such irrevocable proxy is executed and
intended to be irrevocable in accordance with Section 212(e) of the Delaware
General Corporation Law. 3. Representations and Warranties. The Stockholder
represents and warrants to Parent as follows: (a) The Stockholder is the record
and beneficial owner of, and has good title to, the Subject Shares. The
Stockholder does not own, of record or beneficially, any shares of capital stock
of the Company other than the Subject Shares. The Stockholder has the sole right
to vote, and the sole power of disposition with respect to, the Subject Shares,
<PAGE>
and none of the Subject Shares is subject to any voting trust, proxy or other
agreement, arrangement or restriction with respect to the voting or disposition
of such Subject Shares, except as contemplated by this Agreement. (b) This
Agreement has been duly executed and delivered by the Stockholder. Assuming the
due authorization, execution and delivery of this Agreement by Parent, this
Agreement constitutes the valid and binding agreement of the Stockholder
enforceable against the Stockholder in accordance with its terms, except as may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium and
other similar laws of general application which may affect the enforcement of
creditors' rights generally and by general equitable principles. The execution
and delivery of this Agreement by the Stockholder does not and will not conflict
with any agreement, order or other instrument binding upon the Stockholder, nor
require the Stockholder to make or obtain any regulatory filing or approval. (c)
Each of the representations and warrants contained in Section 3.31 of the Merger
Agreement is true and correct with respect to the Stockholder. 4. Affiliate
Letter. The Stockholder agrees to execute and deliver on a timely basis an
Affiliate Letter in the form of Exhibit B to the Merger Agreement, when and if
requested by Parent. 5. Termination. The obligations of the Stockholder
hereunder shall terminate upon the earlier of the termination of the Merger
Agreement pursuant to Section 7.1 thereof or the Effective Time; provided that
in the event the Merger Agreement is terminated pursuant to Section 7.1(e) or
7.1(f) thereof, the obligations of the Stockholder hereunder shall terminate six
months after the termination of the Merger Agreement. No such termination shall
relieve the Stockholder from any liability in connection with this Agreement
incurred prior to such termination. 6. Further Assurances. The Stockholder will,
from time to time, execute and deliver, or cause to be executed and delivered,
such additional or further consents, documents and other instruments as Parent
may reasonably request for the purpose of effectively carrying out the
transactions contemplated by this Agreement. 7. Successors, Assigns and
Transferees Bound. Any successor, assignee or transferee (including a successor,
assignee or transferee as a result of the death of the Stockholder, such as an
executor or heir) shall be bound by the terms hereof, and the Stockholder shall
take any and all actions reasonably necessary to obtain the written confirmation
from such successor, assignee or transferee that it is bound by the terms
hereof. 8. Remedies. The Stockholder acknowledges that money damages would be
both incalculable and an insufficient remedy for any breach of this Agreement by
it, and that any such breach would cause Parent irreparable harm. Accordingly,
the Stockholder agrees that in the event of any breach or threatened breach of
this Agreement, Parent, in addition to any other remedies at law or in equity it
may have, shall be entitled, without the requirement of posting a bond or other
<PAGE>
security, to equitable relief, including injunctive relief and specific
performance. 9. Severability. The invalidity or unenforceability of any
provision of this Agreement in any jurisdiction shall not affect the validity or
enforceability of any other provision of this Agreement in such jurisdiction, or
the validity or enforceability of any provision of this Agreement in any other
jurisdiction. If in the good-faith opinion of Parent's independent accountants,
any provision hereof would cause the Merger to be ineligible for "pooling of
interest" accounting treatment, it shall be deemed to be ineffective and
inapplicable. 10. Amendment. This Agreement may be amended only by means of a
written instrument executed and delivered by both the Stockholder and Parent.
11. Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws thereof.
12. Submission to Jurisdiction. Each party hereto hereby irrevocably submits in
any suit, action or proceeding arising out of or related to this Agreement or
any of the transactions contemplated hereby to the exclusive jurisdiction of the
courts of the United States in Delaware and the jurisdiction of the courts of
the State of Delaware and waives any and all objections to jurisdiction that it
may have under the laws of the State of Delaware or the United States and any
claim or objection that any such court is an inconvenient forum. 13. Capitalized
Terms. Capitalized terms used in this Agreement that are not defined herein
shall have such meanings as set forth in the Merger Agreement. 14. Counterparts.
For the convenience of the parties, this Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. 15. No Limitation on
Actions of the Stockholder as Director. In the event the Stockholder or its
designee is a director of the Company, notwithstanding anything to the contrary
in this Agreement, nothing in this Agreement is intended or shall be construed
to require the Stockholder or such designee to take or in any way limit any
action that the Stockholder or such designee may take to discharge the
Stockholder's or such designee's fiduciary duties as a director of the Company.
Name:
Number of shares of Company
Common Stock owned on the
date hereof:
Accepted and Agreed to as of the date set forth above:
CONCORD EFS, INC.
By:
Name:
Title:
<PAGE>
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